Bond Futures

This is how I do it : Bonds at 100 yield 6%
Bonds at 90 yield 6.6%
Bonds at 110 yield 5.4%
One point is 0.06 % On prices above the par ( 100 ) you deduct from coupon ( 6% ),
On prices below the par you add.

Bonds are at 109
9x0.06=0.54
6.0 -0.54=5.46 %


Walter

 

I thought the article in the Aug '03 futures mag by Howard L. Simons was terrific.

nitro

 

Most all of his work is terrific. As is most of his graduate speak.

It's the truth

 

Walt: The value of a 32nd is extremely variable depending on both the price and duration of the issue. In other words a tick move at one price is not at all the same "value" as a tick move at another price. The higher bond prices go the less a 32nd change in price changes the yield. Also a 32nd move in a 30yr is much less yield sensative than a 32nd move in a 2 yr. There is no "rule of thumb." The yield calculation is so difficult to compute, that special bond calculators, (or now spreadsheets) are needed to figure yields on a variety of issues and coupons.

 

Yes, it's just that I am so overwhelmed now with all I have to read. However, I am going to dig all of my futures mags out and put all his articles near the top of my reading queue and start reading them one by one...

nitro

 

Thanks,
I know that.
All I trade is 30 and 10 and this simple calculation is all I need.
Thanks,
Walter

 

Futures magazine is good for about 4 really good (useful for traders) articles a year.

 

OK.

I have a stack of old Futures mag. I am going to read them all, but I would enjoy knowing which are your favorites.

nitro

 

Does the ACE allow for hidden orders? I've noticed at various points in the day thousands of contracts traded a certain pricepoint, but the size only shows a couple of hundred contracts offered.

 

In the futures world there's a calculation called the "cheapest-to-deliver."

It's kind of a pain-in-the-ass calculation to do or explain by hand but it will show the the best treasury series to deliver against the front month contract.

This is in fact elementary but it appears very difficult. But it's simple only after you know how to do it..... with a Bond calculator.

This is may seem to be a bigger pain than it need be. However, one must remember that fixed-rate instruments have a couple of funky feature like convexity and duration.

These funky features make most fixed-rate calculations a non-linear equation. The way that some of more simplistic explanation are described in this thread will unfortunately yield a non-accurate result.


Regards,
Dr. Zhivodka