Performance of Rolling ZB Futures vs Holding VUSTX/TLT

Martinghoul said:
Why? Futures, regardless of the underlying, are simple instruments. I mean think of it in trivial economic terms: you buy one ZB futures contract today and you sell it a week later. What is your total return determined by?
More...

Exactly. The holder of the future doesn't directly earn the coupon. The coupon return is embedded in the roll from one contract to the next. Are you having trouble stitching all the historical contracts together? A lot of futures data vendors (CSI, Pinnacle) will back-adjust the series for you.
 
Cyrix said:
I am backtesting a strategy which involves rolling the nearest month of ZB (long-term treasury bond futures).
I can't find a total return index for ZB futures that goes back long enough, so I am thinking about using TLT or VUSTX as a proxy. The later starts from the 90s.

Does anyone know how large the difference between the performance of VUSTX vs rolling the front month ZB is?

If the difference is just as small as the difference between TLT and VUSTX then it's considered pretty small and it's good for my purpose.

Thanks.
More...


This is a copy of this version

https://github.com/robcarver17/pysystemtrade/blob/master/sysdata/legacycsv/US20_carrydata.csv

... which is regularly updated (the spreadsheet won't be)

This sheet is nearly as old as I am (1977)

Data from quandl.com

GAT
 
Cyrix said:
I am backtesting a strategy which involves rolling the nearest month of ZB (long-term treasury bond futures).
I can't find a total return index for ZB futures that goes back long enough, so I am thinking about using TLT or VUSTX as a proxy. The later starts from the 90s.

Does anyone know how large the difference between the performance of VUSTX vs rolling the front month ZB is?

If the difference is just as small as the difference between TLT and VUSTX then it's considered pretty small and it's good for my purpose.

Thanks.
More...

Didn't read your email properly. Also this


This is the backadjusted price. If you take differences of this, divide by the PRICE column in the other sheet, you'll get a total % returns from rolling the future on the dates shown.

You know what I'm feeling generous so I've done it for you:


GAT
 
globalarbtrader said:
Basic futures - spot parity, no?

To replicate buying a future I borrow some money and pay LIBOR, and then buy the CTD with the money I've borrowed.

GAT
More...
Nah, if you buy the CTD, you repo it... Why would you borrow unsecured (LIBOR), if you've got UST collateral? The point is moot, regardless. The OP doesn't need to do this, IMHO (it would have been a pain, given it's ZB and there is no ONTR 20y).
 
globalarbtrader said:
Didn't read your email properly. Also this


This is the backadjusted price. If you take differences of this, divide by the PRICE column in the other sheet, you'll get a total % returns from rolling the future on the dates shown.

You know what I'm feeling generous so I've done it for you:


GAT
More...

Thank you so much for your spreadsheet. May I know the Quandl page/identifier that you used as the input?
 
Martinghoul said:
Why? Futures, regardless of the underlying, are simple instruments. I mean think of it in trivial economic terms: you buy one ZB futures contract today and you sell it a week later. What is your total return determined by?
More...

I see. So for futures, regardless of the remaining term and coupon of the underlying, we always just consider as if it's always the latest 30 year bond. Is it correct?

If this is the case, it seems like ZB and UB futures will have exactly the same total returns, right?
 
Cyrix said:
I see. So for futures, regardless of the remaining term and coupon of the underlying, we always just consider as if it's always the latest 30 year bond. Is it correct?

If this is the case, it seems like ZB and UB futures will have exactly the same total returns, right?
More...
Nah, that's not really what I am trying to say...

My point is you should forget that the underlying is a bond, if all you're trying to compute is the total return on the futures. For all intents and purposes, it's a widget which you buy at price A and sell at price B and which doesn't produce any cashflows in the interim (there are some approximations in doing this, but should be good enough, I think; if you want to be careful and care about precision, you actually do need to deal with the duration issues, but, again, that's likely to be a second-order effect).
 
Martinghoul said:
Nah, if you buy the CTD, you repo it... Why would you borrow unsecured (LIBOR), if you've got UST collateral? The point is moot, regardless. The OP doesn't need to do this, IMHO (it would have been a pain, given it's ZB and there is no ONTR 20y).
More...

I guess one of my unspoken approximations was repo rate = LIBOR because it's much easier to get history of LIBOR rates than history of repo rates on specific bonds. And you can say that was a poor approximation to make (though not as bad pre 2007).

And yes, this discussion is pointless since I've already given him what he actually wanted!

GAT
 
You must log in or register to reply here.
Back
Top