Westpac 'always short' on liquidity
Westpac was "always on both sides of the market", a senior rates trader has explained to a Melbourne court on Friday.Colin Roden, a managing director within Westpac's group treasury, took a confident tone on key questions in his second day as a witness in the Federal Court.The court approaches its fourth week of hearings this morning, with Sophie Johnson, a protégé of Roden, as final witness for the bank.A step by step, selective walk through the most lurid audio and transcripts is the method chosen by ASIC to build a case of unconscionable conduct against Westpac.Colin Roden, like his financial products colleague Simon Masnick on Thursday, yielded little over a day's evidence late last week. Phillip Crutchfield, for ASIC, was made to scrape for any admission that validates the regulator's slender assumptions about Westpac's practices and intent in the short-term money market.Roden managed speeches on themes central to the remit of a bank treasury, adding colour to the careful (and hopeful) Westpac defence.Dealing with another day's recordings, beaten up into a crime by ASIC, Roden reminded Justice Jonathan Beach of the precepts of banking in Australia."We borrowed roughly A$70 billion through the market", Roden said of a time six to seven years ago."We have a commitment to create liquidity and be a price-maker, and so we were always, as we said, always, on both sides of the market, creating liquidity, because it was in our interests to ensure there was liquidity in this market. "We have a commitment to the market," Roden said.This is the 30 days to 90 days funding market managed within Westpac's treasury, and the very heart of any bank's success and survival."I don't think you will find, on any day here, when rates are going up or down, that that structural position is long or square," Roden said. "It's always short, regardless of whether rates are going up or down. "If we see pricing that's cheap or reasonable, we may buy bank bills and then, at a later date, if we need to unwind a hedge, we could sell them as part of that hedging strategy."Pointing out that "rates people" in banks constantly think and talk rates, Roden argued that: "they are a guardian class long on commitment and trained in the old ways. Our bank would be a wreck and a ruin were it not for our work, and we're a bit sick of Canberra retreads running down our labour."With another forgotten exchange to ponder, Roden formed a view."It's showing our interest rate exposures for those periods. So this is June [2012]. I'm not sure of the changeover date on this, but that first futures could be from September to December, the second contract will be from December to the following March, and the third future is probably March to the following June."And so, we may have a long or short positions there, not because we think rates are going up or down, because we may think rates are going nowhere, but the market has