Question for Bond Spread Traders

Discussion in 'Financial Futures' started by clacy, Jun 17, 2013.

  1. clacy


    Do most bond spreaders use mean reversion or trend trading when spreading bonds?

    What is the rationale behind your choice?
  2. bone

    bone ET Sponsor

    Without getting in trouble with the paying clientele, I would just like to say that modeling and trading for mean reversion for interest rate spreads has not for me at least been viable longer term in terms of consistency. I used to trade for mean reversion throughout the '90's and into the early '2000's - but speaking for myself I had to change my ways and develop a more relevant and consistent trade entry methodology several years ago. And it seems to be holding up nicely.

    If someone held a gun to my head and insisted that I trade rate spreads for mean reversion, I would look at STIR combinations with more complexity than a simple pair.

    The bigger thing I have come to learn about spreading is the importance in the actual construction of the spread combination. That is really a big deal and has a very profound effect on a spread's behavior and modeling characteristics.
  3. It depends on the spread, innit?