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China money traders bet on 40 to 42 golds

Olympics fever has spread to China's interbank money market, where traders are betting on the host country to take between 40 and 42 gold medals in this year's games - a jump from 32 golds in the 2004 games.

Traders who make their living pricing interest rate swaps and arbitraging in the bill and bond markets have organized an informal “swap” market to bet on China's Olympics medal tally.

Those betting on China to win more than a certain number of golds “buy” contracts at that level; traders betting on a ceiling for China's haul “sell” just below that maximum. Contract prices move in increments of a quarter of a gold medal.

Contracts were bid at 40 and offered at 42 on Tuesday. Traders said it was unclear how much money was going into the market, but the relatively small bid-ask spread - down from 10 gold medals last week – suggested trade was fairly active.

“Opinions are divided over how China will do in individual events, but it seems almost everyone expects at least 40 golds, which is very optimistic,” said a trader at a Chinese bank which is better known for its expertise in interest rate derivatives.

As of Tuesday afternoon, China had won 10 gold medals, leading the United States with six. (Reuters)