Yield spread using Bond futures

NAVEEVIa and bone, thank you both so much for getting back to me. Both responses were very very helpful.

bone, I like your tip on quoting 2 seperate spreads. I do have a TT pro lisence and will give this a go. My only concern is that when things get very busy, I could get legged up or start getting double fills.

Does your website offer any advice for novice spreaders that might not require the same advice as bigger institutions?

Kind regards
 
YOR:

If you only quote one leg when working a spread, you will eliminate the possibility of getting double fills. Also, set your slop to 1 or 2, and only work the order when the market is quite close to your levels as to minimize ECN ratio penalties. You can put 1 payup tic on the leg you are not actively quoting in order to avoid getting legged, but then of course you may not like the outcome as much - the choice is yours.

I tailor my course material to the individual's circumstances: 80% of my clients are independent traders - both self-funded and prop. My value-added is that I save clients a hell of a lot of money and time in the learning curve, and I introduce them to proven markets and methods that they might never have encountered on their own. As you know, it is a lonely world as a trader in the information-sharing realm. I am especially pleased that I have been able to get interest rate spread traders correctly involved with additional revenue streams in the energy markets.

The general feedback I get from clients is that 'they wish they had met me earlier'.
 
30% of my clients are interest rate scalpers and flat-price directional traders who want to learn how to correctly spread trade.

I have been concentrating my client efforts with both individual and group webinar instruction in lieu of website materials at this point in time.
 
Quote from NAVEEVIa:

I have started looking at eurodollar spreads recently & was wondering if i can use them for trading treasury yield spreads.
So today after the NY open cash 2-10s was flatter by about 2-3 bps( Till auction results came out) but most GE 3 month spreads were positive to unchanged.
Now curve at that time was approximately like this
cash 2s +1bp
cash 5s +1bps
cash 10s -1.5bps
cash 30s -4bps

Say my view is 2-10s will flatten what eurodollar spreads should i choose?

Immediatey after the auction yield curve changed drastically with significant steepening taking place, with yield curve changing, implied 3month forward rates & traesury spot rates would have changed. So assuming that spread between treasury & eurodollar( what do they calll that swap spread i think) did not change before & after auction can i assume that eurodollar futures follow these implied forward rates from treasury yield curves.

Whats do you guys think.


Happy Trading

Naveen
More...

Hi Martinghoul,

What are your views on above.
Its an old post on 30 yr auction day.

Regards,

Naveen
 
Quote from NAVEEVIa:

Hi Martinghoul,

What are your views on above.
Its an old post on 30 yr auction day.

Regards,

Naveen
More...
Well, simplistically, I believe that there's a statistically significant relationship between the 2s5s10s fly (I look at it in swaps, but it doesn't matter) and the reds/greens slope in Eurodollars (one of the fundamental reasons for this is the carry dynamic).

You can quantify this relationship yourself easily by doing simple regressions in Excel.

Note that this is different to what you seem to be talking about. Given the liquidity in Eurodollars, I don't think you can look at the move the way you are. If you want to look at USTs vs another set of instruments, you should be comparing to swaps. That's where swapspreads come into play.

Does that help answer your question a bit?
 
bone, I have recently started looking at energy markets - namely the wti and brent arb and also the Brent calendar fly.

Do you trade this fly? And if so, do you execute this manually or do you have any execution techniques that help achive better fills. Similar to that of the CBOT fly.

Kindest regards
 
Quote from Martinghoul:

Well, simplistically, I believe that there's a statistically significant relationship between the 2s5s10s fly (I look at it in swaps, but it doesn't matter) and the reds/greens slope in Eurodollars (one of the fundamental reasons for this is the carry dynamic).

You can quantify this relationship yourself easily by doing simple regressions in Excel.

Note that this is different to what you seem to be talking about. Given the liquidity in Eurodollars, I don't think you can look at the move the way you are. If you want to look at USTs vs another set of instruments, you should be comparing to swaps. That's where swapspreads come into play.

Does that help answer your question a bit?
More...

Well i will have to brush up on my knowledge to understand most of what you say ( Just got my hand on Burghardt)
I understand that swaps you are talking about are OTC instruments with floating leg being Libor rates at respective dates& the fixed leg being quoted, is that right? & swap spreads are difference between this fixed rate & OTR yields of same maturity.


I have three questions

1. Lets say NY session has started , do you see much variation in these swap spreads( more than 1 bps) e.g. after any major data release like NFP last friday USTs advanced initially as data was bad but did anything happen on swap spread front, anything significant?

2. Does the change in cash UST yield curve & implied change in 3 month forward rates anyway influence eurodollar futures?

3. Whats do people who trade STIR future spreads look at for decision making? IMHO technicals have not much role here.

I know you are in different league altogether but you have helped me & fellow ETers a lot.

Thanks,

Naveen
 
Maybe bone could answer a couple of these questions above, while I think of a good way to respond...

Also, you might wanna consult Tuckman and Burghardt books that I often recommend to get a better understanding of the fundamentals.
 
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