I have never looked at t-bill futures... As far as I know, there's no liquidity in them, so I never had any reason to care about the way the rolls are in those.
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Deep backwardation in T-Bonds?
- Thread starter crgarcia
- Start date
Before having any deep thoughts:
(a) Learn about repo market and how forward price of the bond is calculated from the current price and a repo rate
(b) Learn and understand the concept of delivery basket, different kinds of CTD optionality and how that effects pricing
Assuming you have a source for consistent bond and bond futures prices, you can easily model the basis, including the optionality in the basis. There are a number of ways to look at the basis in relative value terms, all of them with their own merits and shortcomings.
(c) Once you got the two concepts above up and running, modelling and understanding the relative value in the rolls is not that hard.
(a) Learn about repo market and how forward price of the bond is calculated from the current price and a repo rate
(b) Learn and understand the concept of delivery basket, different kinds of CTD optionality and how that effects pricing
Assuming you have a source for consistent bond and bond futures prices, you can easily model the basis, including the optionality in the basis. There are a number of ways to look at the basis in relative value terms, all of them with their own merits and shortcomings.
(c) Once you got the two concepts above up and running, modelling and understanding the relative value in the rolls is not that hard.
+1 and amen to that... And, as usual, I would suggest Burghardt's "Treasury Bond Basis" as the one and only starting point.Quote from sle:
Before having any deep thoughts:
(a) Learn about repo market and how forward price of the bond is calculated from the current price and a repo rate
(b) Learn and understand the concept of delivery basket, different kinds of CTD optionality and how that effects pricing
Assuming you have a source for consistent bond and bond futures prices, you can easily model the basis, including the optionality in the basis. There are a number of ways to look at the basis in relative value terms, all of them with their own merits and shortcomings.
(c) Once you got the two concepts above up and running, modelling and understanding the relative value in the rolls is not that hard.