I have been watching the Dec13/14 and Dec 14/15 spreads. Just trying to learn how they move, what moves them. Ive noticed over the past few days the Dec 14/15 is weaker than the Dec 13/14 especially today as the 14/15 has broken down ( intraday anyway) while 13/14 is still well in its range. Is there any specific reason for the difference in the moves and does technical analysis of any use on these spreads? If anyone has any articles, blogs or similar related to these kind of spreads I'd be very keen to read some Thanks!
Just a follow up to this. the past couple of days have seen the spreads continuing in the same direction, the Dec14/15 falling away from the dec13/14 spread and looks like it could keep going further. From what I have looked at over the past 5 years this seems to be going against the norm.... Is this possibly funds reacting to last weeks FOMC or more supply/demand related? If anyone has any info on how these spreads move, or any commentary that covers them I'd be very interested. Thanks!!
Thanks for the reply. I've been looking at the Dec's in particular, Not exactly the whole curve. I've been trying to isolate where the big money is going and the Dec contracts seem to be where the liquidity is. Am I missing the bigger picture by focusing on a small group here? Are there any clear reasons for the changes in the curve over the past week?
Z/Z and Z/M spreads are used to trade the steepness or severity of the curve typically. They exhibit the standard bull and bear spread correlations relative to the front, but are used primarily as long term plays on the term structure. You need to be watching the entire curve to really understand why they move.
Are these spreads more prone to continue, mean revert or depend entirely on what the curve is doing? I thought I had found some patterns in these particular spreads based on movements from past years, but what has happened over the last week seems to go completely against what I was expecting to see. In just trying to figure out if the move over the past week is a 'normal' part of trading the curve or wether it is an abnormal occurrence due to the current macro environment. Wether that be funds moving money based on the fomc last week, the overall supply demand situation etc....
it doesn't seem so typical does it.. i thought a matter of falling future demand, and a held up front month demand.. but what does creating a story around it really do? It clearly originated around the more recent fed meeting..
The more I learn the less I know........ Are there any good books or publications on trading the curve, or at least understanding it?