Hi everyone, Hoping to get some clarification on how to use PCA to hedge a bond futures butterfly against direction and slope. Thus leaving the curvature the part you are trying to trade. Looking at a 2yr 5yr 10yr futures butterfly. One way to construct the fly is simply 2yr yield - 2 * 5yr yield + 10yr yield. But then you have exposure to direction and slope, which I would like to hedge out by changing the ratio of the legs. This is the most relevant article I can find on the interweb: https://quant.stackexchange.com/questions/25342/calculating-pca-hedge-ratio-for-3-leg-spread I'm using the Analyse-It add-in in excel, and believe it is working correctly, but when I try to reproduce the example, I don't get the same PC eigenvectors that Chris Taylor does. Which is confusing. Additionally, when I try a real world example and use a years worth of daily changes in the yields (as calculated by CQG) for the three tenors, the PC3 weightings I get out look wrong (10yr factor larger than the 2yr factor), and in fact the fly becomes more unstable. So I'm definitely going wrong somewhere. Is it correct to convert the futures price to yield, and then use the daily changes in yield? Are the PCA factors then only applicable to the yield-converted contracts? How are they then switched back to underlying futures price? Any help / comments very much appreciated. Euribored.