Negative 30y swap spread

Discussion in 'Financial Futures' started by Daal, Nov 21, 2008.

  1. Daal


    Is there a trade on this annomaly?I dont know much about this so I'm wondering if somebody can clarify this
  2. Daal


    Thanks. This looks like similar to the 98 LTCM situation where there was the off the run treasuries annomaly
    The trade would be long ZT short IS, correct?
  3. morreo


    Yeah, what exactly is the 30 year swap?

  4. Don't think it has anything to do with OnTR vs. OffTR tsys anomaly. That has existed for months when banks started bailing out.

    The trade as you say is correct, but be aware that this spread has caught many of us institutional folks off guard. It's no longer a simple 'mean-reverting' spread like the 2Y swap is (currently).

    Also, make sure you calculate your DV01's and cash flows correctly for the swap leg vs. tsy leg.

  5. Daal


    Ah thanks for the comments. I meant it resembles the LTCM situation because apparently it doesn't make rational sense the 30y swap receving less that what the government is paying.
    I understand the risk here and that why I plan to do this hedged. Meaning I will have a sizable bearish bet on the crunch getting worse(perhaps through fed futures or short brokers or something).

    Could you explain what you meant by your last comments, I'm not familar with that term
  6. morreo


    A DV01 is the dollar value of a one basis point move. It changes the hedge ratios of curve spreads.
  7. Daal


    I just noticed IS(30y swap at the CBOT) has 0 liquidity and 0 open interest, very strange. the 10 swap in the other hand trades. does anyone know if the 30y swap trades in another exchange