is it possible to day trade Euribor ?

Does this mean that the approximate DV01 for Schatz = 650 x €25 / 1000 = €16.25?

I might be wrong. I thought of using simple mathematics here to find myself an answer. Please advice me if I am wrong!

 

Well, according to my numbers, using 7 contracts, 108 lots per contract, it should be 7 * 108 * 25 = €18.9k/bp for 1000 lots of Schatz, i.e. €18.9 per contract (this is fwd DV01, btw).

 

I used to spread the Bobl against the Euribor mid-curve as well 'back in the day'. In many ways, I liked the spread better with the Bobl.

If you're doing that trade, keep the Bloomberg tuned in to the 2 year swaps page, and the Eonia.

 

Hello All.

Ive been trying to trade both Schatz V/s Euribor and Bobl V/s Euribor. The spreads have dramatically reduced the range and getting directional too.

1. Does anyone here has a better way of trading these spreads?

2. What could be the possible reason for these trades to go directional?

 

1. No

2. These trades are always directional. When you trade bond futures vs euribor, you're, simplistically, expressing a view on bank credit (it's not the only factor, but it's one of them). That's the fundamental bit.
Short-term there's also some directionality that's simply due to bond prices being a bit more sticky.

The directionality of swapspreads is a complicated topic. There's a variety of factors involved and correlations are far from stable. It's more of an art than a science, to be honest.

 

What does the duration neutral difference b/w Euribor and Schatz (Euribor minus Schatz) indicate? Does it by any chance signify the difference between the 1. Interbank lending rate and 2. Govt. lending rate to the Banks?

Now, if the difference is getting narrower, does it signify that the economy is improving?

 

Yes on 1, not exactly, but sorta close on 2.

And yes, dramatically tighter spreads might be an indication of an improving economy. Marginally tighter spread, on the other hand, might not imply and improvement, but rather the need by the govt to issue a lot more paper.

 

So if we assume that tighter spread (almost) signifies an improving economy, then in that case the direction of the spread and the benchmark equity index of that country should have an inverse relationship, isn't it?

I tried plotting the above on the chart. But the direction rather seems to be similar. The RED LINE on the chart is the duration neutral difference b/w Euribors and Schatz and the BLUE LINE is DJ EURO STOXX. Please advice.

 

How do you calculate the values in the RED series?

 

RED LINE = [3 x Euribor] minus [5 x Schatz] --

Just an effort to make a synthetic credit spread.