Another question, what are the main yield curve trades in US notes/bonds . Ive seen the 2yr/10yr and 5yr/10yr. I know that the Euribor/Schatz is a big trade in Europe. Woudl the equivalent be trading the Eurodollar/2yr ?
Yes, you do need the DV01s... Yep, that's the TED spread (aka asset swap)... Liquidity in Eurodollars means you can actually do it further out than in EUR. Otherwise, there's the usual spreads: NOB (Note vs Bond), FIT (5y vs 10y), etc...
Martinghoul, any reason what that spread is reffered to as the TED. The theory that Ive looked at refers to the TED as the difference the 3 month T-Bill rate and the LIBOR rate? Also is there any rule as to which ED contract is traded? Thanks for your time on these questions.
Indeed, 'TED', initially, was used to refer to 'T-bill/Eurodollar' spread. However, as time passed, peeps sorta started to use TED to refer to pretty much everything that spread US govt credit on one side to LIBOR. As to what Eurodollars you trade, it normally involves a strip. For example, if I wanna do 2y notes TED, I would do all the Eurodollar contracts all the way out to Jun 11. Again, it will have to be done in a DV01-weighted fashion.
First four contracts are known as 'whites', second four as 'reds', then greens, etc... So, at the moment, if I buy n of each of the four front contracts, I will then own a strip of whites (sometimes referred to as a 'white pack'). If you want to know more, I would highly recommend the seminal Eurodollar book by Galen Burghardt.