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The 15 - 25 1x2 call spread cannot be doing too well today, is what I was referring to...

Ooh-la-la, it's not a great day to be a mammoth... Looked pretty heroic for a bit there, did our proboscidean, but, alas, it was not to last...

This speech by a BoE guy talks about these things in a way that I found more understandable than the academic stuff (pages 3 - 12): https://www.bankofengland.co.uk/speech/2017/real-interest-rates-and-risk There's a bibliography in there with references to papers.

It's actually a fascinating and rich subject... You can read some more recent stuff, where the conclusion is that for all these relative comparisons, all the higher moments of the asset return distributions really matter a lot.

I think it probably can serve as a somewhat useful heuristic at extremes. I am pretty sure this isn't the case here and now, so it would be very difficult to draw any specific conclusions.

Also, why compare with the T-note yield? If you treat your SP500 as a perpetuity with 3.78% yield, its duration comes out to arnd 27.5 years. Surely, in light of that, you should be looking at SP500 vs 30y, no?

S&P earnings yield is certainly a bit more real than the definitely nominal return on treasuries. However, there is a lot more to the discussion of "relative value" than just the headline yield differential.

If you have a halfway decent spreader, you should be able to trade them in any ratio you like, I suppose... And yeah, I agree, it would make quite a bit more sense to use the new TN as the belly of that fly to make it a little less skewed. But then everything would look a LOT different.

Yeah, so even if you use the 50:50 weights (as suggested by Bobbybax), it's still a very asymmetric fly, which makes it a tough one. This is the long-term plot of the yield fly from BBG: This is what the yield fly looks like long-term: I would find it difficult, here and now, to join the...

Funny how this works, eh?

It's a little bit of a funny beast, this one... You're doing a 5-7-18 fly which, by virtue of being so asymmetric, will be driven mostly by the ZB leg (esp given your weights). It's not entirely clear what the view you're trying to express here is.

Fiddy is long these far out OTM wings... He's long the liquidity option, obviously. Partly, that's what this trade is all about.

ETFs might work, but you'll need to be careful about all the ETF'y features, like tracking errors and/or costs and the like... It's not clear to me that holding ETFs would be cheaper, all in, than holding and rolling futures.

Not really a good way to do it, tbh... If you could get some liquidity in the far out ED contracts, maybe you could do something. Any method you choose will have some quirks and complications that you would need to take into account, so there's no free lunch, no matter how you slice it.

1) The dynamics of spreads are complicated... It's a can of worms and it would take a long time to describe all the relevant aspects of doing a trade like this. 2) Yes, the idea that EDZ8-Z9 or Z9-Z0 is a good proxy for the UST 2s10s or 5s30s slope is an approximation too far, IMHO. While...

There are all sorts of interesting measurements that people have attempted to use, instead of GDP... It's a work in progress.

Exactly, I think it's a fascinating look at the world's economic history, which China dominated for a while. I find it all quite interesting.

You might like this chart, @Sig, from Angus Maddison, may he RIP (it's one of my favorites and I might have posted it here before): You could possibly argue that it's all just a reversion to the long term steady state :).

Calculated Risk is one of the best blogs on the US economy (and housing, in particular) out there... Moreover, it's reasonably light on opinion and focuses on tracking specific relevant bits of data. I am a huge fan. And yes, I am really not sure which particular bits elicited the puzzling...

Just for the heck of it, this is a pretty good post on the subject by a very thoughtful blogger... http://www.calculatedriskblog.com/2018/01/update-for-fun-stock-market-as.html Sure looks like trading the Obama rally was a lot more fun than trading the Trump one, innit?