10 year cash v 10 year future

Discussion in 'Trading' started by weezy, Dec 26, 2012.

  1. weezy


    can we get a thread going on the 10 year cash arb versus the future. this is a pure arb. who's trading this ...
  2. This is not a pure arb. You are exposed to changes in the CTD, as well as changes in your cash financing rate. Even if you hedge out the optionality in the deliverable it becomes a curve trade. Mark-to-market swings can be considerable. Read Burkhardt's Treasury Bond Basis book to understand the mechanics.
  3. Ten year futures have much less duration than ten year cash. I'm assuming you're referring to the on the run ten year also.

    There are a lot of factors that make this spread move, it's not arb
  4. highly correlated spread would be the proper term
  5. Since it was brought up in another thread, how does someone who traded all sorts of futures on various exchange floors think that a pure arb would exist in the retail world under ANY circumstance?