ZB TYX transformation

T

Topsurfi

I have a simple question regarding the ZB future.
If you assume that the 30y yield stays the same, what will happen to a certain ZB contract ?

thanks !
 
Quote from Surdo:

Yields go down as Price goes up my friend.

Look at a chart of TYX. vs ZB. [/QUOTE

sorry, let me be more precise (I know they work inverse of course).
ZB June09 is now at around 130 whereas ZB Dec08 is now at 132.
What will happen to the June09 contract if the yield (TYX stays exactly the same ?)
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Quote from Topsurfi:

Quote from Surdo:

Yields go down as Price goes up my friend.

Look at a chart of TYX. vs ZB. [/QUOTE

sorry, let me be more precise (I know they work inverse of course).
ZB June09 is now at around 130 whereas ZB Dec08 is now at 132.
What will happen to the June09 contract if the yield (TYX stays exactly the same ?)
More...

1. Ignore ZBZ08, it is coming off the board in a few weeks and is NOT the front month, I would only watch March... ZBH09 currently.

2. If The Yield DOES NOT change, Price should not move either!
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The price on the March-09 should rally to where the December-2008 is now because futures contracts don't pay interest. They get priced at a discount in a positively-sloped yield curve environment. Otherwise, it would be a "free money" hedge. Wouldn't it? Any quant-jockey, rocket-scientist, arb-freaks care to chime in? :confused:
 
Correct on #1; I'm not so sure about #2 since he's talking about a June expiration...maybe nazzdack could comment here :p

EDIT: just pops up above - thanks! -
 
Quote from Bernard111:

Correct on #1; I'm not so sure about #2 since he's talking about a June expiration...maybe nazzdack could comment here :p
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JUNE 09 is up '19 with a spread you can drive a Hummer through & 29 contracts traded!

MARCH 09 is up '22.
 
Quote from nazzdack:

The price on the March-09 should rally to where the December-2008 is now because futures contracts don't pay interest.
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OK, thanks.
This means if you want to short 30y thresuries for the long run, you will take a loss of around 4000 US-Dollar per ZB contract per year if yield stays exactly the same.
 
Quote from nazzdack:

The price on the March-09 should rally to where the December-2008 is now because futures contracts don't pay interest. They get priced at a discount in a positively-sloped yield curve environment. Otherwise, it would be a "free money" hedge. Wouldn't it? Any quant-jockey, rocket-scientist, arb-freaks care to chime in? :confused:
More...

Yeah, that's right
 
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