0
$\begingroup$

The CME describes how to put on a 2s10s trade in this screenshot:

https://i.stack.imgur.com/2yPzW.jpg

Looking at current 2 and 10 year futures the CTD is roughly a 2 year and 7 year respectively.

Am I right in saying that using the current 2 and 10 year futures to put on a 2s10s trade, you're actually not capturing the spread between the 2 year yield and the 10 year yield? It's more the 2 and 7 year yield spread?

$\endgroup$

1 Answer 1

2
$\begingroup$

According to the contract specs of the 10 Year Treasury Note ("TY") future, you can deliver any UST

with a remaining term to maturity of at least six and a half years, but not more than 10 years, from the first day of the delivery month.

So yes, TY is typically closer to a 7 year UST than a 10 year.

Perhaps you can look at UXY, the 10y Ultra Future, which is closer to 10 years with a minimum remaining maturity of 9 years and 5 months.

The pool of deliverable bonds for TY (currently around 18) is much wider than for UXY (currently 2).

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.