I know that you are talking about the 30 year bond, but it might be best to state it as it might lead to confusion. BTW, any reason people only talk about the 30 and not the 10? nitro
In this case, I was referring to the 30 year bond, however, I think that the basic concepts of risk management apply across all products and instruments. I believe that when people refer to the 30 year bond, they are really referring to the so-called 30-year bond future or USU3 (front month). Actually, the 30-year bond future has a duration closer to 10 years. I do not believe that there is a future on the 10-year bond, and even if their is, it is much less liquid than the 30-year bond future. Best. Neal.
Nearly double the volume goes to the 10 year note futures contract compared to the 30 year. 10 year is the benchmark and replaced 30 year when the treasury stopped issuing 30 year bonds. Even the 5 year note futures contract has more volume than the 30 year. I guess these guys like the 30 year because it has larger moves, is more volatile, trades in 1/32 instead of .5/32 like the notes, etc..
bid for huge size go by on the 30 yr ACE ZB contract 112 1/32 bid for 500 or so after the 2/32 offers lifted ... he went away
I think it is important for bond traders to always remember the general rule about the relationship between interest rates, maturity and volatility.. Here is the rule: " ...As interest rates move, bond prices do not move by equal amounts, The longer a bond's maturity, the faster the bond's price will move in response to interest rate changes. This is due to the compounding effect of interest rates on the bond's value..." So, longer maturity = greater volatility, shorter maturity = lower volatility... Those who studied for series 7 probably remember the above!
You're still trying to outthink this Bond move aren't you? This a gift from the trading gods. Take it. Dr. Zhivodka