Yield spread using Bond futures
- Thread starter NAVEEVIa
- Start date
Can someone guide me to a good resource for learning technical analysis of Bond futures, any book ,thread, blog etc.
I am familiar with Market profile theory though dont have the tool in software, Plain old PA will be much better.
Heres my take on current situation , we have seen equities perform well in asia europe along with commodities, higher risk appetite & dollar falling gainst majors. My view is this call for higher yields with steepening in 2-10s in last 2 sessions, a steepener might be right trade for 1- 2bps.
Now besides all this i would like to evaluate the technical situation in bonds, can some one guide me on this.
Have been looking & done few trades on ZT ZF ratio 1:1 trade, must admit that cash 2-5s very closely follows cash 2-10s , see attched chart, (green 2-10s, white 2-5s)
I am familiar with Market profile theory though dont have the tool in software, Plain old PA will be much better.
Heres my take on current situation , we have seen equities perform well in asia europe along with commodities, higher risk appetite & dollar falling gainst majors. My view is this call for higher yields with steepening in 2-10s in last 2 sessions, a steepener might be right trade for 1- 2bps.
Now besides all this i would like to evaluate the technical situation in bonds, can some one guide me on this.
Have been looking & done few trades on ZT ZF ratio 1:1 trade, must admit that cash 2-5s very closely follows cash 2-10s , see attched chart, (green 2-10s, white 2-5s)
I wil try to clarify myself here.
What i am trying to know is that what big boys look at when evaluating technicals of bond markets.
My take is that if someone trades 2-10s cash curve he looks for
economic data, auctions, FED actions etc & based on this will take a view. Curve steepening/flatenning moves persist for anywhere from 3 days to 30-40 days .
Regarding above fundamental aspects every trader will analyse his/her way but mostly big players look at things similarly( e.g in FX markets players look at key support/Resistanc levels).
I am trying to find what ppl look at in bonds when doing technicals, is it MP or S/R or soemthing else.
Anyone here any experience here on this or any insights, plz come forward.
Thx
What i am trying to know is that what big boys look at when evaluating technicals of bond markets.
My take is that if someone trades 2-10s cash curve he looks for
economic data, auctions, FED actions etc & based on this will take a view. Curve steepening/flatenning moves persist for anywhere from 3 days to 30-40 days .
Regarding above fundamental aspects every trader will analyse his/her way but mostly big players look at things similarly( e.g in FX markets players look at key support/Resistanc levels).
I am trying to find what ppl look at in bonds when doing technicals, is it MP or S/R or soemthing else.
Anyone here any experience here on this or any insights, plz come forward.
Thx
Personally, it is a relief and a benefit for me NOT to know the identity of the counterparty to my trades.
In 17 years of experience, both on the floor and on the screen, including OTC, I have to admit that the identity of what someone could label a 'player' in the markets and their corresponding trades as an indicator to overall market direction is flawed.
A high percentage of those trades are for customers of all types, or are hedges for bilateral OTC deals.
I think that your efforts would be better served vetting out highly correlated instruments for the purpose of creating an indicator.
In 17 years of experience, both on the floor and on the screen, including OTC, I have to admit that the identity of what someone could label a 'player' in the markets and their corresponding trades as an indicator to overall market direction is flawed.
A high percentage of those trades are for customers of all types, or are hedges for bilateral OTC deals.
I think that your efforts would be better served vetting out highly correlated instruments for the purpose of creating an indicator.
Can you decsribe how you trade the spreads and the fly:
- how long do you hold your trade
- do you leg in, leg-by-leg, or do you enter the spread with a spreadtrader or if manually you try to enter all the legs at the same time?
- what about exiting your spreads.
for a fly trade, what chart do you use? any pics?
- how long do you hold your trade
- do you leg in, leg-by-leg, or do you enter the spread with a spreadtrader or if manually you try to enter all the legs at the same time?
- what about exiting your spreads.
for a fly trade, what chart do you use? any pics?
NAVEEVia:
You are slow to get a response in my view because there are far fewer independent and prop futures traders involved in the CBOT yield curve.
In terms of modeling and correlation analysis, the trade has become a real lemon. The weighted NoB, for example, does not 'behave' like a relative value spread really should. No matter how you weight your DV01, the spread too frequently assumes the directionality and volatility of the flat price futures market. If you really look hard, it makes business sense to forgo curve trading in the 2-30 and just take directional futures risk when you include execution costs and slippage.
You are slow to get a response in my view because there are far fewer independent and prop futures traders involved in the CBOT yield curve.
In terms of modeling and correlation analysis, the trade has become a real lemon. The weighted NoB, for example, does not 'behave' like a relative value spread really should. No matter how you weight your DV01, the spread too frequently assumes the directionality and volatility of the flat price futures market. If you really look hard, it makes business sense to forgo curve trading in the 2-30 and just take directional futures risk when you include execution costs and slippage.
There is plenty of opportunity to make money spreading the curve on CBOT contracts. A simple NOB spread alone has had substantial range already today. Get a spreading application and have at it.
I am only trading spreads no fly, earlier used to trade 2-5-10 fly with 3:5:2 ratio could not relate it to cash yields & no intraday mean reversion hence left it.
I trade 2-5s with ratio 1ZT:1ZF, i primarily trade it by looking at cash 2-10s, if you plot cash 2-10s with cash 2-5s they go almost neck to neck though last few days this relationship is not that exact but still i am yet to see 2-10s change by 3 bps or more in one direction & 2-5s do something else.
I use spreader to trade. All trades are strictly intraday.
I looked at your chart it seems that scale on right is 1 dollar, i will check this out tomorrow in office & let you know my thoughts.
What i can make out is that you are assuming 1ZB:1ZN spread its mean reverting & follow Buy low of range & sell range high.
CBOT recommends 5:3 ratio, which one is better one has to look. Basically my idea is to have ratio which mirrors cash spreads well.
Also i have seen that if you have position open as per CBOT ratios the margin requirement is very less.
In chart this spread as fallen which means that ZN has risen more than ZB, plz correct me if i am wrong.
What have observed is that CBOT recommnded ratios for 2s5s & 2s10s follows very closely cash spreads & i take all decsons based n cash yield changes.
I am looking for get better handle on cash 2-10s that all & then take position in futures. e.g today i had a flatenning bias & sold 1ZT:1ZF this made money, yesterday i had asteepening bias & lsot money, i am not making any money in this trade just trying to decipher 2-10s curve.
Thanks for dropping by.