Euribor Schatz

very favoured local and arcade trade
schatz bobl and eibor arbing
sophisticated stacking and arb "pigs" exist everywhere
with big firepower
many without regard for fundamental curve shifts
they just take rough with smooth and assume a mean reversion at a new level

difficult to get inside or an edge over these technologies
many delude themselves by legging but in teh end what they end up doing is a dircetional trade on the slower leg
have experimented myself many times
 
Quote from chintanthakkar:

Daxspreader, Your ratio of Bund:Schatz = 1:4.1934 whereas on BBG its showin up as 1:4.72, so you might want to check it once again if the trade does not fall into your trading pattern.

Martinghoul, I guess we had this long discussion on TED spread couple of months back and I guess we arrived at chosing 1 Euribor contract to hedge against Schatz future and arrive at a duration neutral ratio. Have you recently been trading this spread?
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Hey Chintan

As i mentioned before, im NOT using the DV01 ratio based hedge, to hedge small/parallel shifts in the yield curve. The ratios i use are based on linear regression and are volatility adjusted. My ratios change every morning at the start of day, and can change dynamically as well.
 
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