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I am trying to get a simplified model of the DV01 for the US 10YR Note futures but I cant figure out what the current yield is. When I back out the implied interest rate on the current TYM3 futures contract (as of 3.12.13) I get a YTM of about 2.53, however the current GENERIC 10 Year yield or TNX is only 2.03 or so.

I understand that the 10 year future is referenced off a 6% bond and that the Generic yield is from the current on the run bond. But I am trying to understand why there is such a large difference between the implied futures price yield and the generic yield.

Also, is there cost of carry holding futures contracts? I believe there is, equal to the current yield but I am not sure

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  • $\begingroup$ Are you taking accrued into account in the calculations, both at the time of purchase of the contract and at the time of delivery? The cost of carry would be the repo rate between the purchase date and the delivery date. $\endgroup$
    – ikh
    Commented Mar 12, 2013 at 14:58

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i figured it out. the difference between the Generic Yield and the Futures price implied yield is do to the difference between the current "on the run" 10 year bond the current cheapest to deliver (CTD) bond for the futures contract.

Wow who would have thought figuring out DV01 for a futures contract would be so hard to do.

Since current yields are much lower than Futures 6% reference bond, the CTD will be a shorter maturity higher coupon bond and therefore will have a higher YTM (after conversion factor) vs on the run bond

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