Offsetting price risk

Quote from Traveler:

If you hedge it perfectly you will end up with only the risk-free rate. If you want the 5% yield you have to take the risk of holding the long bond.
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Right. What he's saying is he wants the risk free rate, but he wishes it was more than (next to) nothing.

To the OP: you can't do it. If it was possible to get a higher yield from the 30 yr old bond without rate/price risk, then everyone would do it. No one likes being paid 0.1% or whatever.... The fact notes are still trading at that level tells you something.
 
The long bond future is NOT just a derivative of the 30y bond (which, by the way, the current 30y will eventually become the old 30 and another newly issued bond will become the 30y bond). The long bond future has a deliverable basket and contains a delivery option for the seller. The long bond future (US1, not WN)'s current cheapest-to-deliver is really the T 6.75 8/26 while the current 30y bond is the T 4.25 2/41.

I have no idea what you by 'trading against' it.

Quote from lasner:

Thanks for the feedback...sorry but I'm a little confused on bonds. I can margin 9% of my account and trade against it. Can I also short futures contracts against the bond. I called my broker they told me no...that they were two different products???
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Quote from sjfan:

The long bond future is NOT just a derivative of the 30y bond (which, by the way, the current 30y will eventually become the old 30 and another newly issued bond will become the 30y bond). The long bond future has a deliverable basket and contains a delivery option for the seller. The long bond future (US1, not WN)'s current cheapest-to-deliver is really the T 6.75 8/26 while the current 30y bond is the T 4.25 2/41.

I have no idea what you by 'trading against' it.
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Trading against it to offset risk
 
Okay, so as I and others have said above - it wont' work as well as you might think it does because of the delievery optionality in the futures.

Quote from lasner:

Trading against it to offset risk
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