I'm trying to understand the relationship between /ZN and TNX. There is another thread here from many years ago, but it didn't answer the pricing. My specific question: ^TNX is at 3.8620 today, implying an interest rate of that much per year for the next X years. (Not sure the exact duration). /ZNU4 is at 113'100 as of close. My math says that the interest rate on the CTD bond (at like 6.5 years I think) for the /ZN contact would be like 1.25 % or so, working backwards. How is /ZN priced ?
https://www.quora.com/How-do-you-ca...-interest-rate-of-a-10-Year-U-S-Treasury-note https://www.cmegroup.com/education/files/understanding-treasury-futures.pdf recently acutioned 10s last week, had a coupon 3.875. do the math. 10-Year 91282CLF6 08/15/2024 3.960% 3.875% $99.303721
If you know python, the rateslib package is good. You just need to supply the eligible basket of deliverables.
I think tnx is a constant maturity interest rate (model an interest rate curve and pick the 10y point every day and that's your level). The ideal way to look at the future is to use the conversion factor of the CTD bond multiply by futures price and that is the fwd price of your cash bond, you can then do all your yield calcs from there. You can also back into the yield of the future using the futures price, the fixed coupon (6% as of now), and the time to maturity of the ctd bond. You may have to adjust by probability weighted CTDs if there is a possibility of CTD switch. You should get fairly close to that TNX level.