Bond trading

[XxQuote399]

Hello,

Im new to the of use bond futures theres some things that im not sure

What is a good profit on a bond move ? for example a common 100 pip move in FX ? I always see bonds moving 30bp average is that the normal move ?

on that case bonds are more leveraged to equate to a 100 pip move in FX ?

To express directional views the 10 year is the simpler place ?

 

[Martinghoul]

Hello,

Im new to the of use bond futures theres some things that im not sure

What is a good profit on a bond move ? for example a common 100 pip move in FX ? I always see bonds moving 30bp average is that the normal move ?

on that case bonds are more leveraged to equate to a 100 pip move in FX ?

To express directional views the 10 year is the simpler place ?

Don't say 30bp, that's very misleading in the context of bond futures...

I'd say 0.5 - 1 big figure is a pretty decent and not too rare of a move for the 10y. And yes, 10y is where there's most liquidity and it's the easiest to punt.

 

[Sidekicker]

Hello,

Im new to the of use bond futures theres some things that im not sure

What is a good profit on a bond move ? for example a common 100 pip move in FX ? I always see bonds moving 30bp average is that the normal move ?

on that case bonds are more leveraged to equate to a 100 pip move in FX ?

To express directional views the 10 year is the simpler place ?

put up an ATR on the daily chart and you'll see what is average.
On bif news days, they move more.

 

[Rhody Trader]

I did this comparison of volatility across markets a while back, and took a bigger look a couple months ago. The bottom line is the 10yr Treasury price moves are a little smaller on average than are those of exchange rates.

As to whether bonds are more leveraged than forex, the answer depends. In certain places where leverage restrictions on forex trading are tighter the answer is yes. But if you're somewhere that still has 100:1 leverage (or higher) on offer, then clearly the answers is no.

 

[XxQuote399]

For example if I want to have exposure of 1 Lot on FX the 10y should be leveraged double that to a 200k position ?

 

[Rhody Trader]

For example if I want to have exposure of 1 Lot on FX the 10y should be leveraged double that to a 200k position ?

Are you trying to match volatility?

If so, as mentioned above you'll want to compare the normalized Average True Range mentioned above (N-~ATR) between the 10yr and whatever currency pair you're looking to compare with to come up with a ratio. That will give you a comparison in % changes and not points/pips, which are not directly comparable.

And keep in mind that the ratio should be based on a common currency. Say you get a ratio of 2:1 as you've described. In that case $200k of 10s would not be equivalent to say 2 lots of EUR/USD because that much EUR/USD would be worth 200,000 x EUR/USD ($260k at 1.30, for example). You would have to figure out the $ value of the currency position you're comparing too (assuming it's not a USD/XXX pair) and then apply your ratio.

I hope that makes sense. It's a bit convoluted.

 

[XxQuote399]

About the change in the instrument is better to call the yield ? for example 30 bps = 0.0x ? that is about the 32s and 24s ?

 

[Rhody Trader]

If you're talking futures the convention is to quote price rather than yield - so 32nds or ticks rather than bps. In the cash market it's the other way around.