Euro$ vs. 10-year Contract LIstings

landboy · Sep 23, 2005

Why is it that the Eurodollar futures contracts extend waaaay out into the future, I think I can buy 2015 eurodollar contracts. But I can only buy 2006 10-years? Both contracts are based on future expectation of interest rates.

Here's my problem, I'm forecasting long-rates will be over 10% by 2009, do I just buy current-month ZN and just keep rolling it over?

thanks

landboy · Sep 23, 2005

one more try

Pabst · Sep 23, 2005

Quote from landboy:
I'm forecasting long-rates will be over 10% by 2009, do I just buy current-month ZN and just keep rolling it over?

thanks [/B]

Wouldn't you want to be short?

landboy · Sep 23, 2005

Quote from Pabst:

Wouldn't you want to be short?

Ya, sorry, I"d be short bonds

Pabst · Sep 23, 2005

Your best options are to short ZB or ZN and roll them.

landboy · Sep 23, 2005

Quote from Pabst:

Your best options are to short ZB or ZN and roll them.

Cool thanks, do you think I'd be paying too much of a premium for them if I had to always roll to a new contract, I also looked at CBOE options and the late-2006 has waaay too much risk-premium priced in.

Pabst · Sep 23, 2005

Quote from landboy:

Cool thanks, do you think I'd be paying too much of a premium for them if I had to always roll to a new contract, I also looked at CBOE options and the late-2006 has waaay too much risk-premium priced in.

Unfortunately if the curve steepens you'll be forced to short ZN at substantial discounts to cash. You're on the other side of the carry trade.

landboy · Sep 23, 2005

Quote from Pabst:

Unfortunately if the curve steepens you'll be forced to short ZN at substantial discounts to cash. You're on the other side of the carry trade.

that's what I thought, I guess I was hoping to get around that by shorting the back-months, but I guess they don't exist...

thanks for that

sle · Sep 25, 2005

Quote from landboy:

Here's my problem, I'm forecasting long-rates will be over 10% by 2009

I'd sell you a 4y10y payer swaption (a right to enter into a pay fixed swap) at a reasonable cost. Or would you rather have an american touch at 10% in 10s?

On a more serious note - if you do have such a long term view on the interest rates, why not look into buying/selling one of the Lehman's yield curve ETFs - they would do the rolling for you. You can even take a position on BEI using their TIPS ETF.