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 !
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?
Correct on #1; I'm not so sure about #2 since he's talking about a June expiration...maybe nazzdack could comment here EDIT: just pops up above - thanks! -
June-2009 "should" behave the same. The deferred contracts would be expected to converge up to the spot month.
JUNE 09 is up '19 with a spread you can drive a Hummer through & 29 contracts traded! MARCH 09 is up '22.
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.