Yield spread using Bond futures

Hi Martinghoul,
Did some research on basis & calcualted that for OTR US bonds.
The idea here is simple , someone trading curve using futures should be aware that futures maybe out of sync with cash, if we track the changes in gross basis for OTR bonds with futures , we can atleast have a warning signal that futures & cash are not in sync.

For calculating gross basis, following was assumed
Settlement day- today
gross basis= cash minus futures(LTP)*Conversion factor

This came as following for 2,5 & 10 OTR & futures
2yr 0.73
5yr 1.06
10yr 3.25

This is in decimal for 100 par value bond.

Now my question is: Is the idea of tracking basis to gauge whether cash & futures are in line sound enough?

Thanks & Regards
Naveen
 
Quote from NAVEEVIa:

Hi Martinghoul,
Did some research on basis & calcualted that for OTR US bonds.
The idea here is simple , someone trading curve using futures should be aware that futures maybe out of sync with cash, if we track the changes in gross basis for OTR bonds with futures , we can atleast have a warning signal that futures & cash are not in sync.

For calculating gross basis, following was assumed
Settlement day- today
gross basis= cash minus futures(LTP)*Conversion factor

This came as following for 2,5 & 10 OTR & futures
2yr 0.73
5yr 1.06
10yr 3.25

This is in decimal for 100 par value bond.

Now my question is: Is the idea of tracking basis to gauge whether cash & futures are in line sound enough?

Thanks & Regards
Naveen
More...
It's certainly sound... What you could do is plot a time series of the gross basis for the current contract (as well as a few older ones), to get a sense of the dynamic of the basis (e.g. any particular periods when basis mis-behaves should stand out). Be careful to use the right OTR bond and conversion factors.
 
Can some one guide me how to get intraday US on the run Yield spreads data. I have looked at following options but things seem muddy at best

1 . Bloomberg has a ticker GGR for generic rates as per my chat with help it is OTR yield & one can get intraday data.
2. Bloomberg also has ticker USYC2y5y Index , desciption says selling OTR 2s & buying OTR 5s.

The data currently i follow is from BG Cantor , where based on last trade & yesterdays settlement it shows the change in yields. e.g in yield terms 2s closed at 1.098 on friday , currently at 1.074.

Basically i want to 1 min value of 2-5s, 2-10s OTR yield spread & then calculate the net change from yetesrdays representative price whther close or settlement( as in BG cantor) & see whether these changes have any persistence i.e if 2-5s is steppening does the steepening persist for the session.

Any suggestions
 
Quote from NAVEEVIa:

Can some one guide me how to get intraday US on the run Yield spreads data. I have looked at following options but things seem muddy at best

1 . Bloomberg has a ticker GGR for generic rates as per my chat with help it is OTR yield & one can get intraday data.
2. Bloomberg also has ticker USYC2y5y Index , desciption says selling OTR 2s & buying OTR 5s.

The data currently i follow is from BG Cantor , where based on last trade & yesterdays settlement it shows the change in yields. e.g in yield terms 2s closed at 1.098 on friday , currently at 1.074.

Basically i want to 1 min value of 2-5s, 2-10s OTR yield spread & then calculate the net change from yetesrdays representative price whther close or settlement( as in BG cantor) & see whether these changes have any persistence i.e if 2-5s is steppening does the steepening persist for the session.

Any suggestions
More...
Why don't you construct a CIX by using CT2 Govt and CT5 Govt?

Formula for 2s5s should look something like this:
YIELD[CT5 Govt] - YIELD[CT2 Govt]

If you want to control where the quotes for these tickers come from, you can use PCS to specify particular sources.
 
Good thread! Keep it going I say!

I have been asked about buying options on Canadian short term interest rates to protect against up moves? Is there an OTC market for this?
 
Quote from zf trader:

Good thread! Keep it going I say!

I have been asked about buying options on Canadian short term interest rates to protect against up moves? Is there an OTC market for this?
More...
There's most definitely an OTC mkt, but there's also the options on exchange-traded BAX (Bankers Acceptance) futures (traded on the Montreal exchange). Liquidity ain't great, to put it mildly, but I'm sure you should be able to get a price if you ask arnd. For example, there's some open interest in Mar10 99.125 puts.

It all depends on the time horizon of what you're trying to achieve...
 
Have been following basis for both cash OTR & CTD bonds direction & magnitude of change is very close for ZT & ZF but for ZN the variation is more this is yesterdays chart ZN CTD & Cash OTR basis in dollars for 1 contract.
Next chart is US OTR yield spread( in %) with ZT ZF spread in ratio 1-1 in dollars overlaid on it.
By using ratio 1-1 we are actually giving more weight to ZF, this very closely follows 2-5s spread, i was thinking of doing something similar with2-10s, giving more weight than DVO1 based to ZN.
What do you guys say?
BTW anyone here daytrade yield spreads(2-5s, 2-10s) like this either thru cash or futures, if yes please shre your views.
 

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I hope someone else responds and offers some insight, whether same or different. Otherwise, this is uncomfortably one-sided...

Naveen, let's wait and see if someone else says anything. Then I can tell you what I see.
 
Quote from Martinghoul:

I hope someone else responds and offers some insight, whether same or different. Otherwise, this is uncomfortably one-sided...

Naveen, let's wait and see if someone else says anything. Then I can tell you what I see.
More...

Ok, I will wait for other responses, was also wondering does anyone use technical analysis like support/resistance, trend, breakout when trading yield spreads because they look & behave like outright, maybe lot more trendier than many equity futures.
 
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