Questions tagged [bond-futures]

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Ten Year Note Futures Implied Repo Rate calculation from CME Understanding Treasury Futures Document

I am trying to determine how CME calculated their Implied Repo Rates in table 3 on the penultimate page of the Understanding Treasury Futures Document: https://www.cmegroup.com/education/files/...
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2 votes
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The price of liquidity

We are currently in the US Treasury roll period when investors are rolling from the previously issued notes and bonds into the currently issued notes and bonds, aka "Rolling from Off-The-Runs to ...
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Intercommodity spreads interest rate futures notional and stdev

If I trade a TUT spread (2 2-y futures and 1 10-y futures) what would be the contract multiplier or notional value of a spread? The 2y has a notional of 200,000 with 1.5% stdev each while the 10y has ...
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formula for pricing bond-futures

Is anybody able to help me understanding why does $P_t(S)$ appear in the solution to the following problem; deriving the price of bond forward contracts? Thank you Given: $r_t$, the instantaneous ...
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Difference between eurodollar and 2 year note futures

What's the difference between these instruments? I know that the Eurodollar is for dollars outside of the US, but is there any material difference other than contract size when it comes to trading ...
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government bond volatility indexes

I'm reading "The price of Government bond volatility" from A. Mele & Y. Obayashi https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2255553 and I have a question regarding the fair ...
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Yield curve steepening/flattening using different duration treasury futures (TUT Spread) and volatility

Yield curve steepening: long 2 contracts 2 year (2 contracts due to contract size), short 1 contract 10 year Vice versa for flattening. If the 2 year note has a expected volatility of 2% per contract (...
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Euro-Bund Futures fair value

I am trying to calculate the fair value via discounting the cashflows of the (synthetic underlying) for the euro bund futures (https://www.eurex.com/ex-en/markets/int/fix/government-bonds/Euro-Bund-...
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Short Eurodollar futures front v back month

What is the difference between shorting the front month, rolling it into a back month vs just shorting the back month? For example: shorting the front month and rolling the short every 3 months until ...
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Synthetic bonds with FX futures

FX futures price in the interest rate of different currencies, so can you use US treasury bonds (for example /zn) and FX futures (for example SGX USD/CNH FX Future) to create a synthetic bond of a ...
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Eurodollar futures trading and mechanics

I need help with calculating the profit I'd make if I was short the Jun '23 Eurodollar futures contract @99.275. I believe that it'll move to 98.75, which should net me a profit of 0.525*2500=1312.5. ...
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Decomposing bond futures into the cheapest-to-deliver underlying bond

For a regulatory perspective, I need to decompose bonds futures into the underlying cheapest-to-deliver (CTD) government bonds on a given date. Suppose I have a 100 bond futures position on date $d$. ...
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What does it mean for a coupon bond to have "par value"?

I am doing the Interest Rate Models course on Coursera. In the third lecture of the second week, the lecturer provides this lemma: Lemma 1 A coupon bond has par value at $T_0$ if and only if its ...
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Understanding the BAML MOVE index

Hello quant community. I am looking for more information about a very interesting index: BAML-ICE MOVE index. There is very little literature online that details how the index levels are calculated ...
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Understanding end-of-month options embedded in Treasury Futures

I'm struggling to understand the end-of-month option embedded in Treasury Futures. Specifically, I'm looking at what would happen to CTD when yields rise or fall. What are the main differences between ...
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Can the carry of bond future be approximated by conventional yield and implied repo?

I have a question regarding bond futures, carry and convenience yield $y$. Suppose we look at the cheapest to deliver bond for a bond future. Suppose the CTD has a conventional yield of $-0.72$ and ...
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Duration of a futures contract

I have tried to find an answer to this question but have come up with nothing. So, it is my understanding that to find the duration of a futures contract (assuming no switch risk), all you need to do ...
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2 votes
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What does the conversion factor for Treasury bond futures do in relation to the 6% coupon specification for the contract?

I understand that the specification for say, a 10-year Treasury note futures contract is for a face value of $100,000 with a 6% coupon. However, the eligible securities that may be delivered span ...
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3 votes
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Impact on DV01 of cbot bond futures by changing coupon from 6% to 4%

CBOT has been asking customers lately what their thoughts would be on coupon change from 6% to 4% on all bond futures. I believe the last time this was done was in 2000 where the coupon was changed ...
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Novice question about bond pricing [closed]

I'm reading a material on DV01 calculation which use a example as follows: current 10-year Treasury note that is cheapest-to-deliver into the March 2009 10-Year Treasury Note futures contract: the 5-1/...
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2 answers
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Convention for computing returns on bond futures

From the CME website, we know that the contract unit for bond futures is "face value at maturity of $100,000". Which of the following is more appropriate the convention to compute "...
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Why is the economic exposure in a hedge using govi futures so different between cash and derivative?

I have a question regarding swap spread trade. Let's assume I would like to bet on a swap spread widening. For this I could put a payer swap and going long the same maturity cash bond $DV01$ matched. ...
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Interest rate hedging using treasury futures – timing and duration

I'm pondering over the following (rather standard) problem: We have \$10 million invested in government bonds and are concerned with highly volatile interest rate over the next six months. We want to ...
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1 answer
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Implied repo rate calculation from Fabozzi

I'm looking at the chapter Implied repo rate in Fabozzi's Fixed Income Handbook. There it is defined as the return received by going long the basis, i.e. buying the cash bond (financing it with the ...
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Treasury futures cost of carry and P&L

I'm looking to understand the P&L implications of holding 2YR treasury futures. Assuming no movement in interest rates through to maturity (i.e., no capital gains or losses due to interest rate ...
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Is there Carry Effect for Cash Settled Bond Future

As we know, physical settle bond future would expose carry effect which would be the deliverable bond coupon and your financing cost (cost of carry as a sum term). This is because it can be replicated ...
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3 votes
3 answers
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How can we compute the daily drop in gross basis?

Background The implied repo rate (IRR) is essentially the carry for going long basis (buying the deliverable bond and selling the futures contract). For this reason, it rises in value day-by-day as ...
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What are the trade offs when choosing a long term bond future to trade?

It seems that when trading long term bonds *** and choosing between the two offerings on CME one is presented with a Scylla and Charybdis decision. 1. VOLATILITY CONSISTENCY: Ultra U.S. Treasury Bond ...
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5 votes
4 answers
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Bond ETF vs Bond Future for longer term holding

How would a long term investor go about evaluating the prospect of investing in a bond ETF vs a long position in a future of equal duration? Let’s asume this investment is in a taxable account. Let’s ...
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3 votes
1 answer
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How can I approximate the hedge ratio for Inter Commodity Treasury Spreads?

Looking at the excellent CME Treasury Analytics tool, I can see that the hedge ratio for spreads betweend diff treasury futures is derived from the DV01 of each leg. I can get treasury futures data ...
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2 votes
3 answers
2k views

How does one price the market value and estimate the fair value of a bond futures roll?

Consider the current situation: we are entering December, meaning that the December futures are being rolled into the March futures (i.e. traders are selling their holdings of December futures ...
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Intuition and reasoning behind conversion factor calculation for bond futures

I am currently reading the chapter on bond futures from J.C. Hull. The author states the procedure for calculating conversion factor as The conversion factor for a bond is set equal to the quoted ...
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Why do Treasury Futures settle at maturity with higher yield-to-maturity than the corresponding spot rate? [duplicate]

Absolute beginner on bonds, trying to understand why spot rates seen for US-T don't seem to line up with CME futures for ZT/ZB/etc at their maturity. For instance, ZB-U8 seemed to settle at 140-27 on ...
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what is the underling of treasury bond future contracts? and what determine/drives bond future's theoretical/market prices? [duplicate]

Am I right that the underlying is a basket of deliverable bonds? If this is the case, how is the bond future prices actually determined? If there was only one bond in the deliverable set, the bond ...
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DV01 of bond future from DV01 of CTD

Is there a way to compute the DV01 of a bond future, from it's underlying cheapest to deliver bond's DV01? For example, is this correct? : DV01 future = DV01 CTD / conversion factor? Or any other ...
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How do you calculate or estimate the future gross basis of a treasury future?

Gross Basis for treasury futures = clean price - future price* conversion factor Is there a way to estimate the gross basis, say 10 days from now, given that you know what the forward bond price is? ...
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get base asset price for bond future

Is it possible to obtain the base asset price (underlying price) for futures using the first and second periods future. like let's say we have $ FGBL_1 $ first future and $FGBL_2$ second future. $ ...
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At what time (BST) are interest rate futures settled daily on Eurex Exchange?

ie, what is the earliest time can I expect to see settle prices for all interest rate futures (ie, BUXL future, GILT future) on Eurex exchange? Is it 15:00 local time just like it is on CME ?
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1 vote
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option on bond future - any caplet representation out there ?

I'm trying to play with bond-future options. Bond future is a future contract on a basket of bonds. The short-side will deliver the so-called bond cheapest-to-deliver (CTD). A bond-future option is ...
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2 votes
4 answers
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Treasury futures basis & calendar spd [multiple questions]

How do I determine if a bond will become CTD in a futures contract and how likely there a CTD switch is? Also, how do you use implied repo/actual repo to assess richness/cheapness of two calendar ...
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4 votes
2 answers
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Determine the carry of a treasury bond futures contract?

Hi fellow financial market enthusiasts. I'm trying to understand my options as a retail investor. I want to leverage a cash bond portfolio but my broker does not allow that, so I want to use futures ...
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Proxying historical bond futures duration

I am trying to come up with a very simple/approximate way of filling up historical bond futures duration. The proposal I have is - lets say for Mar 17 FV contract, I pick up the on-the-run for that ...
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11 votes
6 answers
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What are some of the best textbooks on Fixed Income securities?

I'm looking for something that might be considered the 'Bible' of fixed income. Ideally it would contain everything from the basics of PV and discounting cash flows all the way up to some of the most ...
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2 votes
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'Market price' based Delta vs 'Model Price' based Delta for Bond Future Options?

My understanding of Delta is the change in the Option's price relative to the change in the underlying asset's price. In the case of Treasury Future Options (ie those on CME), one intuitive way to ...
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3 votes
1 answer
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Modified duration of treasury futures tracking CTD?

If I know TYU7 contract's CTD is T 2.500 05/15/2024 with modified duration of 6.37. I know futures DV01 is calculated by taking the CTD's DV01 divided by conversion factor as shown here. What is the ...
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2 votes
2 answers
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"Forward price of bond" VS "Price of a bond with a future settlement date"

What is the difference between 1) computing the 'forward price' of a bond at a future time T. ( spot price - carry, involving repo rates) 2) computing the price of a bond (discounting all cash ...
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3 votes
2 answers
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How to calculate the daily carry on a bond future?

I have been calculating daily carry on a normal bond as the difference in yields from one day to the next (roll down basically), interpolating the yield on one day, and interpolating it for the ...
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2 votes
3 answers
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Why repo goes negative for bonds trading special

Please help me find the fault in my reasoning! It seems to me that when a bond is trading special , it is in short supply and high demand , and so excessive number of people are borrowing money to ...
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Textbook for US Treasury Bond / Notes Futures

Is the text The Treasury Bond Basis by Burghardt still the authoritative source on this topic? The most recent edition was published in 2005. I think that, based on the contents and others' ...
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1 vote
2 answers
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Unemployment data and bond futures

All other things being equal, why would rising unemployment data lead to (a trend) of increasing bond futures? Is the line of thinking that bond futures prices have the same relationship with ...
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