ZB TYX transformation

Discussion in 'Trading' started by Topsurfi, Dec 2, 2008.

  1. I have a simple question regarding the ZB future.
    If you assume that the 30y yield stays the same, what will happen to a certain ZB contract ?

    thanks !
  2. Surdo


    Yields go down as Price goes up my friend.

    Look at a chart of TYX. vs ZB.
  4. Surdo


  5. The price on the March-09 should rally to where the December-2008 is now because futures contracts don't pay interest. They get priced at a discount in a positively-sloped yield curve environment. Otherwise, it would be a "free money" hedge. Wouldn't it? Any quant-jockey, rocket-scientist, arb-freaks care to chime in? :confused:
  6. Correct on #1; I'm not so sure about #2 since he's talking about a June expiration...maybe nazzdack could comment here :p

    EDIT: just pops up above - thanks! -
  7. June-2009 "should" behave the same. The deferred contracts would be expected to converge up to the spot month. :)
  8. Surdo


    JUNE 09 is up '19 with a spread you can drive a Hummer through & 29 contracts traded!

    MARCH 09 is up '22.
  9. OK, thanks.
    This means if you want to short 30y thresuries for the long run, you will take a loss of around 4000 US-Dollar per ZB contract per year if yield stays exactly the same.
  10. Yeah, that's right
    #10     Dec 2, 2008