Performance of Rolling ZB Futures vs Holding VUSTX/TLT

[Martinghoul]

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

While you don't need the specific rates, but rather just GC, history of LIBOR is still easier to obtain. However, I don't think it's the right approximation, especially in this day and age. In fact, at the moment, there's a LOT of action occurring, which makes things even more dicey.

And yeah, I think you've given him what he needs.

 

[Cyrix]

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

I tried to create a TR series using the return column and got a series like this, which didn't look right.

The formula is basically =previous value*(1+return/100)

The spreadsheet is here.
https://dl.dropboxusercontent.com/u/9846094/Public/Bond Futures TR.Chart.xlsx

Could you please take a look and let me know what I did wrong?
Thanks again for you help.

 

[globalarbtrader]

I tried to create a TR series using the return column and got a series like this, which didn't look right.

The formula is basically =previous value*(1+return/100)

The spreadsheet is here.
https://dl.dropboxusercontent.com/u/9846094/Public/Bond Futures TR.Chart.xlsx

Could you please take a look and let me know what I did wrong?
Thanks again for you help.

G2 should be equal to B2

Rest of column G should be G2+D3

D3 should be IF(or(isblank(B3),isblank(b2)),0,B3-B2)

If you want % returns, take them off G3

GAT

 

[Cyrix]

Thanks for clarifying.
I tried these formulas, and noticed that the TR series has only grown 3 times over the past four decades, with CAGR at 3%.

My friend who has a Bloomberg terminal found a ticker MLT1US30 Index (Merrill Lynch 30 Year Treasury Bond Futures TR) on Bloomberg and it had grown 35 times at CAGR of 9%.

Why is the difference so large?

The spreadsheet is located here.
https://dl.dropboxusercontent.com/u/9846094/Public/Bond Futures TR.Chart.xlsx

Thanks again.

 

[globalarbtrader]

Thanks for clarifying.
I tried these formulas, and noticed that the TR series has only grown 3 times over the past four decades, with CAGR at 3%.

My friend who has a Bloomberg terminal found a ticker MLT1US30 Index (Merrill Lynch 30 Year Treasury Bond Futures TR) on Bloomberg and it had grown 35 times at CAGR of 9%.

Why is the difference so large?

The spreadsheet is located here.
https://dl.dropboxusercontent.com/u/9846094/Public/Bond Futures TR.Chart.xlsx

Thanks again.

One is a cumulated series, the other cumprod. Also the ML index might include an interest component.

GAT

 

[Cyrix]

One is a cumulated series, the other cumprod. Also the ML index might include an interest component.

GAT

Do you know how to replicate a cumprod from your data source?
I tried but got the chart on post #22 above.

Thanks.

 

[kassad]

Thanks for clarifying.
I tried these formulas, and noticed that the TR series has only grown 3 times over the past four decades, with CAGR at 3%.

My friend who has a Bloomberg terminal found a ticker MLT1US30 Index (Merrill Lynch 30 Year Treasury Bond Futures TR) on Bloomberg and it had grown 35 times at CAGR of 9%.

Why is the difference so large?

The spreadsheet is located here.
https://dl.dropboxusercontent.com/u/9846094/Public/Bond Futures TR.Chart.xlsx

Thanks again.

According to this article: https://alphaarchitect.com/2015/04/...sting-how-should-we-invest-in-treasury-bonds/

The Merrill Lynch Bond futures Total Return Indexes measure the performance of a fully collateralized rolling U.S. Treasury Futures position, and can be replicated via rolling 15 days prior to First Notice and an investment of the cash collateral in T-Bills. So the large difference between the GAT ZB Bond line and the MLT1US30 line comes from the T-Bills! The performance of the MLT1US30 is a lot closer to TLT or holding the cash bond itself then the GAT ZB Bond performance (or the performance of the continious 30 year treasury bond future) which lags a lot in comparison.

Can anybody tell me how to get the same performance as TLT ×2 or MLT1US30×2 (or insert your desired multiplier) using the ZB futures contract if you have a long time horizon? It is not as simple as putting up only half the collateral instead of full collateral, as that doesn't cover the T-bill component...