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Regression swap vs bond future

I have to perform a regression to get an hedge ratio. The dependent variable is the change on day of a swap fixed rate (f.i. 10y) and the independent variable is the change on day of a bond future ...
Flash7's user avatar
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54 views

Bond Basis (non CTD)

I had a query regarding the trading of non CTD (but deliverable) basis. Obviously someone can buy non CTD basis (buy cash / sell bond future), with the hopes this widens, clearly I would not want to ...
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FX-Effect on (foreign) interest rate future

this is not (directly) a quantitative question but since there are so many knowledgeable people here and I've found so many helpful discussions in the past, I ask it nonetheless (I haven't found an ...
CouldUseSomeHelp's user avatar
1 vote
0 answers
135 views

Bond basis arbitrage

The popular media refers to US.bond future basis trades in some contracts as arbitrage..they cite that as the future trades richer to cash hedge funds can buy basis and make money. I'll assume they'...
user68819's user avatar
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In the life of a bond future contract, can a bond be removed from the delivery basket?

It is clear that a bond can be added to the delivery basket in the life of a contract. For example, a new issuance. But can a bond be removed from a basket?
Peaceful's user avatar
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WN 30Yr UST Futures Conversion Factor vs Delivery Ratio

What is the logic behind using the conversion factor in determining the hedge ratio of deliverable bonds in 30Yr UST futures (WN contracts) throughout the trading life of the contract, but then having ...
AlRacoon's user avatar
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155 views

Is the Forward Price of a bond subject to the Pull to Par?

From my understanding: FwdPx= SpotPx - Accruals + Financing Assume that the yield curve is flat/or that the bond yield stays the same the next day, i.e. that the market is unchanged and that the only ...
Giuseppe's user avatar
1 vote
2 answers
355 views

mathematical proof of the hedge ratio formula for bond futures

We know that the hedge ratio ϕ_F that we should use in order to to the duration-hedging through bond futures is: $$ϕ_F= -(DV01_B / DV01_{CTD} )\cdot CF_{CTD}$$ Where $\textrm{DV01}_B$ is the dollar ...
luca dibo's user avatar
1 vote
0 answers
56 views

I am trying to compute the the tail of a future roll using the ratio of forward dv01

I am trying to compute the the tail of a future roll using the ratio of forward dv01, per the link CME: Calendar Spreads with Tails : I am trying to compute the the tail of a future roll using the ...
viki's user avatar
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Bond future's roll (and other rolls)

I am missing some intuition on the above subject. Say I am long CTD basis (I.e. short futures): I may opt to hold onto my position till last delivery for many reasons, say switch, wildcard etc. Why ...
user68819's user avatar
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Calculating DV01 for Treasury Futures with CTD switch risk

With rates rising, certain contracts, such as the USZ3, are prone to frequent CTD switches with sometimes large differences in the DV01 of an underlying CTD. Does anyone know of any resources for ...
Tim W's user avatar
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Repo/Fwd/Spot/Bond Futures

I have a slight confusion with regards to what price the repo rate impacts. Assume the repo for a particular bond richens. My current thought process is, spot should also richen (as now that bond ...
user67825's user avatar
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Spot vs fwd bond

Slight confusion here; say I am long a 10y bond and short the same bond 3m fwd. Roughly over 3m I earn: Carry on my spot pos = 3m9.75y yield - 10y yield. Roll on my spot = 10y yield - 9.75 yield Total ...
user68819's user avatar
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2 votes
1 answer
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Repo impact on Bond Future Basis

I wanted to check my understanding on something. Say bond A (deliverable, but not CTD) goes special (from GC) at some point. What can we say about how its basis should behave? A. Firstly the bond ...
user67825's user avatar
2 votes
2 answers
444 views

Why are long 2 year Treasury futures (ZT) trading at negative carry?

The 2 year Treasury note yields ~4.9% in the cash market as of 29 Aug 2023. Assume implied cost of financing of 5.5% pa (3 month T-bill rate) to finance a long futures position. This results in a ...
craftcase's user avatar
1 vote
1 answer
315 views

Carry/slide on Treasury CTD basis position

I'm trying to understand whether a long CTD basis position needs to incorporate slide/roll when computing basis net of carry (BNOC). I am told the answer is no but I am not sure why. I am well aware ...
Transcending's user avatar
2 votes
0 answers
93 views

Bond Futures: PnL Mismatch between underlying treasury yield delta and futures prices at close&open

I've traded the "US 2YR NOTE (CBT) Jun23"- Future TUM3: On 15-03-2023 I bought 70 contracts at 103,67829. On 30-05-2023 I closed the position at 101,97266. The CTD was back then: T 0 ¼ 06/...
DataAdventurer's user avatar
2 votes
1 answer
111 views

Credit Spread Replication by Long/ Short Bonds

I am trying to derive the credit spread using an hypothetical portfolio of a long corporate bond plus a short treasury bond, which have the exact cashflows. I should be able to get the credit spread ...
Kingvader Wong's user avatar
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2 answers
432 views

treasury bond futures rolldown

Treasury futures contract has no carry, but what is its rolldown (if it exists)? In the above answer to carry, @Helin mentioned "...bonds have expected rolldown returns that will flow through to ...
user34829's user avatar
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what is the rationale behind CTD (Cheapest to Deliver) mechanism in bond futures

why doesn't futures contract just stipulate a specific contract to be delivered. Is it because the futures seller cannot readily buy specific bond contracts?
boonga's user avatar
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Intuitive way to think about Bond Futures in a long only cash portfolio

I think this is the intuitive way to think about specialness in bond futures, at least to my mind; therefore, I am wondering if my logic is correct: Cash Bonds have a forward price that is totally ...
Wadstk's user avatar
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0 answers
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How to choose limit prices on IR futures when targeting a specific 2s10s spread?

I understand the concept of DV01s and when doing an interest rate future trade I need to use about a 2:1 ratio when trying to trade the 2s10s. This is explained here: https://www.cmegroup.com/...
filifunk's user avatar
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4 votes
2 answers
608 views

Implied repo rate and slope of the yield curve

In page 34 of "Treasury Bond Basis" (Third Edition) by Burghardt et al, it says: If the yield curve has a positive slope, carry for someone who is long bonds and short futures is positive. ...
user34829's user avatar
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2 votes
2 answers
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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/...
Long_Only_VIX_Investor's user avatar
2 votes
0 answers
62 views

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 ...
AlRacoon's user avatar
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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 ...
bl00mb3r8's user avatar
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73 views

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 ...
JamieC113's user avatar
-1 votes
1 answer
128 views

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 (...
Jay C's user avatar
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0 answers
142 views

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-...
Stelios Kounis's user avatar
0 votes
1 answer
84 views

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 ...
Jay C's user avatar
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-1 votes
1 answer
195 views

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 ...
Jay C's user avatar
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0 votes
1 answer
209 views

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. ...
Jay C's user avatar
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0 votes
1 answer
362 views

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 $d$. ...
JejeBelfort's user avatar
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1 vote
2 answers
286 views

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 ...
user54908's user avatar
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2 votes
0 answers
736 views

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 ...
Simon Roberts's user avatar
1 vote
1 answer
210 views

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 ...
GZ-'s user avatar
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1 vote
1 answer
704 views

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 ...
swissy's user avatar
  • 157
1 vote
1 answer
2k views

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 ...
basisnerd123's user avatar
2 votes
1 answer
6k views

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 ...
junior_pm's user avatar
3 votes
1 answer
705 views

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 ...
TheRevoltingBlob's user avatar
0 votes
1 answer
174 views

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/...
techie11's user avatar
  • 213
2 votes
2 answers
161 views

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 "...
vpy's user avatar
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0 votes
1 answer
164 views

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. ...
swissy's user avatar
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1 vote
0 answers
164 views

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 ...
user2175871's user avatar
0 votes
1 answer
3k views

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 ...
math's user avatar
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1 vote
2 answers
2k views

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 ...
arna's user avatar
  • 13
2 votes
0 answers
113 views

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 ...
HoldBreath's user avatar
3 votes
3 answers
861 views

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 ...
quanty's user avatar
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4 votes
0 answers
83 views

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 ...
hernanavella's user avatar
5 votes
4 answers
2k views

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 ...
Camilo Avella's user avatar