Yield spread using Bond futures

Discussion in 'Financial Futures' started by NAVEEVIa, Aug 3, 2009.



    Hi everyone,
    I am a new person in US bond futures market & primarily trade spreads & butterfly. Since my questions in the other thread may diverting from main topic i decided to open a new thread.
    All are invited,



    I primarily trade by looking at whats happening in cash yields & cant imagine any other way, its very discomforting trading bunds, bobl schatz butterfly without having a look at cash but thats a very stable mean reverting trade.

    So here are my questions

    1. If we look at the ladder of any bond futures, the bids & offers change very fast even though no trade has taken place, lots of machines also placing & pulling orders, Does that have anything to do with trades, orders in cash market, i.e. if cash 2yr is has large best bid then ZT will also have alrge bid?

    2.What are active cash hours trading in US, i take 12:30 PM GMT to 07:00 PM GMT as active hours?

    3. Do we have bots working in cash market also or are most of trades take place through real human buyers/sellers working for some institution?

    Good trading
  3. 1) It may. A large order in one market can spawn large orders elsewhere from traders who are "leaning on" the original large order who are doing basis or spread trades.
    2) 7:20am to 2:00pm (Chicago Time), the hours of the trading pit. :cool:
  4. 1. It might have something to do with cash. Or it might not. It might have something to do with the swap mkt (i.e. someone trading futures swapspreads). Or it might be someone hedging their mtge with outright futures. Or it could be delta-hedging of options which has nothing to do with the cash mkt at all.

    2. The cash mkt is open practically 24hrs a day (Asians do their dirty deeds in the wee hours of the morning). So is the eCBOT electronic futures (specifically 23:30PM - 22:00PM GMT; pit is open 13:20PM - 20:00PM GMT, as ndack alluded).

    3. Normally it's people, but it might be anything. There's electronic trading in cash treasuries, so there may very well be various algos running.


    Thanks ,
    sorry i was not being clear, specifically what hours should one consider as active hours for cash bonds trading during US hours, i understand that being a OTC market like FX no opening or closing hours are set.

    What is relative value trade, does trading 2-10 treasury yield spread qualify is relative value trade?

    Martinghoul in your earlier post you mentioned that indirect bidder( i understand those bidders who are not US institutions, is this correct) bid directly to Treasury, so primary delaers have no knowledge of indirect demand is that so?



  7. I think in terms of real activity it's probably between 8AM and 3PM (maybe 4PM) New York time, but I would hesitate to put an exact number on it. As I said liquidity is there all the time, but maybe the best opening hours are when the NY Fed dealing desk is open.

    I would classify it as a curve trade, rather than RV. To me cash RV is more about trading micro bond switches within the same sector. It could however be 2s10s if your rationale for the trade is some sort of model signal, rather than a macro call. Generally, distinctions between macro and RV are blurry.
    Indeedy, that's my understanding of the process...


    Can somebody tell me which of the following options is better for Eurpean fixed income cash quotes.
    1 Bloomberg
    Cost is high , on blommie Bid/Ask spreads on cash bund is as high as 4 ticks, i dont know whether such is the case in actual interbank market.

    3. Reuters 3000 Fixed income ,
    have contacted a sales rep, i guess their's must be a better product for fixed income with all dealers quotes on german bonds,
    we wont trade cash but just need the cash real time feed.

    there has been some significant flattening moves yesterday in 2-10s in europe , someone trading Bund Bobl Schatz cant trade effectively without knowing curve change taking place in cash.
    Anyobody here trade yield spreads using futures?

  9. I only use BBG, simply because I like the user interface... I also hate Reuters. To me it's the clunkiest thing ever.

    I occasionally would trade the curve using futures, but it's not ideal, 'cause there's basis risk that you may or may not want to run.
  10. NAVEEVIa


    I see the following Bid/Ask on Bloomberg page BBT currently for german bonds, the spread seems high compared to futures

    2yr 100.085/100.105
    5yr 98.665/98.695
    10yr 101.190/101.225

    Whats the closing time for german cash bonds?
    #10     Aug 6, 2009