bond yield - why watch it?

S

sea_cat

Hi forum this is my first post. I mainly trade currencies FX but would like to test the water with trading bond futures such as the bund and maybe US 10 year or 30 year.

My question though is quite simply. Why do I see traders talking about the yield curve for their particular bond. If they are watching the order flow of the price , which is what they are trading, why are they also watching the yield curve of the bond if they are inversely related?

I actually studied fixed income at university but I just can't get how when something is inversely related bond traders are watching it and making decisions based on watching that.

I could understand watching a yield curve of all the bonds put together such as 2 year, 5 year, 10 year etc and that giving evidence of flattening or steepening etc but where do you actually find that curve to watch and why even watch individual yield curves when you can just determine that from the price. i. e 2 % move today so the yield goes down 2%

Am I missing something here? ..
 
sea_cat said:
Hi forum this is my first post. I mainly trade currencies FX but would like to test the water with trading bond futures such as the bund and maybe US 10 year or 30 year.

My question though is quite simply. Why do I see traders talking about the yield curve for their particular bond. If they are watching the order flow of the price , which is what they are trading, why are they also watching the yield curve of the bond if they are inversely related?

I actually studied fixed income at university but I just can't get how when something is inversely related bond traders are watching it and making decisions based on watching that.

I could understand watching a yield curve of all the bonds put together such as 2 year, 5 year, 10 year etc and that giving evidence of flattening or steepening etc but where do you actually find that curve to watch and why even watch individual yield curves when you can just determine that from the price. i. e 2 % move today so the yield goes down 2%

Am I missing something here? ..
More...
longterm vs shorterm, If I can loan at x% for two years, I want to paid appropriately more for loaning 20 years out.
 
I would think a bond trader could extract information from watching the yield curve as well.
The member Murcuto ? comes to mind as a pro bond trader that used to post here.
Those participating in the old bond threads may have a history of informative posts.
Search em.
 
thanks I will. actually i think i get it. you would only watch yield because of that expectation based on inflation. What is a bond giving you now as to what it has given you in the past, that is for long term traders. So aa a short term trader you can interpret the yield curve in reflection of price and the sentiment and value of the denomiated currency of the bond now vs what is what worth in the future and past, i.e what is a bond worth to someone, who is investing etc . Then you can think of this in terms of risk onrisk off on a daily basis. So I guess it does matter in respect of the value of the currency.

does anyone want to comment on this. Is there anyone who scalps bonds who just doesn't care about the value of that currency. I wouldn't have thought so. I think I have solved my confusion.
 
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