Questions tagged [bond-futures]

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11
votes
6answers
6k views

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 ...
11
votes
1answer
2k views

Pricing Treasury futures

I've recently learned that at the delivery of Treasury futures the short side can decide which of the $n$ Treasury bonds (with relevant maturities) to deliver. If the short side chooses to deliver the ...
7
votes
1answer
1k views

Why is two-factor model so popular for bond futures?

Given that which bond in the basket becomes CTD depends massively on idiosyncratic moves among different bonds, should we not be always using N factor model instead of 2 Factor model? By using only ...
7
votes
1answer
1k views

Korean Bond futures market: is there a fundamental difference between 3yrs, 5yrs and 10yrs contracts?

I would like to model Korean government bond futures. So far I know two concepts (just a short, incomplete description) cash-settled futures (e.g. Australia): The average yield of a basket of bonds ...
6
votes
2answers
462 views

Principal components in treasuries: spot vs futures

I'm looking to use first few principal components of the US treasury yields for trading, and have choice of using either the data for treasuries themselves, or for the corresponding futures contracts. ...
5
votes
4answers
1k 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 ...
5
votes
1answer
2k views

How to compute the yield on the Ultra-Bond Treasury Futures

I am trying to compute the yield on the Ultra-Bond Treasury Futures which is roughly 172.2187. Heres the description of the contract: U.S. Treasury bonds with remaining term to maturity of not ...
4
votes
2answers
3k views

Why is “full” Yield Curve (term structure of interest rates) 3 component based?

I am trying to understand bond-valuation and construction of yield curve. I don't have any exposure to bootstrapping or what-so-ever as of now. So it's appreciated to have an example but not too ...
4
votes
1answer
18k views

Conversion factor for bonds

Hull defines the conversion factor for a bond as the "quoted price the bond would have per dollar of principal on the first day of the delivery month on the assumption that the interest rate for all ...
4
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0answers
66 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 ...
3
votes
1answer
362 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 ...
3
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2answers
5k views

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 ...
3
votes
2answers
6k views

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 ...
3
votes
3answers
405 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 ...
3
votes
1answer
2k views

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 ...
3
votes
1answer
266 views

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 ...
2
votes
4answers
673 views

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 ...
2
votes
1answer
2k views

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 ...
2
votes
3answers
1k 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 ...
2
votes
2answers
110 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 "...
2
votes
3answers
3k views

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 ...
2
votes
1answer
218 views

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? ...
2
votes
2answers
2k views

“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 ...
2
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0answers
66 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 ...
2
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0answers
75 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 ...
2
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0answers
102 views

'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 ...
1
vote
1answer
112 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 ...
1
vote
3answers
126 views

What is an estimated rise in the interest rate of the 10-year Treasury in this scenario?

Suppose that the Federal Reserve had raised interest rate by 0.25% last week 17Sep2015. What is an estimated rise in the interest rise of the 10-year Treasury? Which futures contract should one use to ...
1
vote
2answers
1k 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 ...
1
vote
2answers
123 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 ...
1
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1answer
956 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 ...
1
vote
1answer
796 views

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 ...
1
vote
1answer
140 views

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. $ ...
1
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1answer
166 views

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 ...
1
vote
0answers
36 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 ...
1
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0answers
55 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 ...
1
vote
2answers
99 views

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 ...
1
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0answers
44 views

Historical UK Gilt 2-year and 5-year data

Data on the Medium (approx. 5-years) and Short (approx. 2-years) futures contract listed on ICE only goes back to 2009. Is anyone able to point me towards where I can get a longer time series, perhaps ...
0
votes
1answer
56 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 ...
0
votes
1answer
101 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/...
0
votes
1answer
829 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 ...
0
votes
1answer
54 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 $d$. ...
0
votes
1answer
84 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. ...
0
votes
1answer
55 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. ...
0
votes
1answer
131 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 ...
0
votes
1answer
408 views

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 ...
0
votes
1answer
204 views

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 ?
0
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1answer
164 views

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 ...
0
votes
1answer
167 views

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' ...
0
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0answers
40 views

T-Note Futures or equivalent T-Note ETF (IEF)

If I wanted to be long $100000 of IEF, would the equivalent be long 1 T-Note futures due to contract size? Would the yield that is priced into the futures contract , or the implied financing rate of ...