Decimalise T-Bonds!

[zeeuk]

Why the Hell don't the Americans decimalise their Bonds? Why do they still quote them in fractions (32s) and why did they do so in the first place? Anyone know the logic behind 32s.

Also, does anyone know how to work out the FITE and NOB spreads? I've tried various formulas in Excel, but can't get them to work. Not much a whiz so doing something wrong. I use CQG but it's crap with time-keeping. Anyone?

Cheers

 

[BBB]

Yanks arent decimiaised yet because, by and large, they are stupid.

What do you want to do with the spread ratios? Is this for margin purposes? The CBOT have quite a few articles/pdf's on these which you can download. There are specific ratios published - usually in the performance bond/margin section. If you trade comprises of this ratio, you get substantial margin reductions - if not, you cough up as if you are trading the outrights (i.e. probably less size). The articles seem mostly for large funds hedging exposure, but may be of interest......

http://www.cbot.com/cbot/pub/page/0,3181,1175,00.html

 

[zeeuk]

I'm trading the 30yr against 10, and the 10 against 5. Nothing to do with margins. I use CQG for spread charts (3*2 for both NOB and FITE), but in times of market movement, it is always delayed by a couple of seconds. Not good enough basically - I use excel with a direct feed from CBOT (via TT), but can't get the formulas right to decimalise it.

 

[tbill]

I think traders, rightfully, fight decemalisation because they fear that this increase fees, in a sneaky, backdoor way. If the value of your tick goes down but you are charged the same per contract then it is a de facto fee increase. We saw this when the ten year started to trade in half ticks. (I hate the term half tick, a tick should be the smallest price difference a contract can trade in. Therefore, half tick in impossible. IMHO)

 

[jmreeve]

The 32s I can live with but it is the half 32s and quater 32s that are really stupid.

 

[ttrade]

Calculating spread prices is a little tricky - you can't just do (Five Year * 3) - (Ten Year * 2) as you might expect. You have to convert the prices into "raw ticks" before doing the multiplication and subtraction.

e.g. 109125 in Ten Year

109 + ((125/10)/32) = 109.390625
109.390625 * 128 = 14002 (Raw Ticks)

Do the same for the five year, then do the maths using the raw tick prices. Then to convert the result back into the normal price format :

14002 (Raw Ticks) / 128 = 109.390625
(109*1000) + (.390625*32)*10 = 109125

See, it's easy!!!!!!!

 

[bundbaby]

Why the Hell don't the Americans decimalise their Bonds? Why do they still quote them in fractions (32s) and why did they do so in the first place? Anyone know the logic behind 32s.

Also, does anyone know how to work out the FITE and NOB spreads? I've tried various formulas in Excel, but can't get them to work. Not much a whiz so doing something wrong. I use CQG but it's crap with time-keeping. Anyone?

Cheers

to answer part of your origianal question as to why t bonds/notes were traded in 32nds -

stems back to all stock trransactions. they generally would have been traded in whole numbers. then as competition incresed and margins got smaller, that was halved, then halved again, etc. etc

So you got 1/2's then 1/4 then 1/8 then 1/16 then 1/32 and now effectively 1/64.

the next step could be 1/128 - that is point where common sense one hopes will prevail - therefore decimilisation is immenent AT LAST

 

[zeeuk]

Thanks ttrade. It's taken over a year, but I finally have an answer! Guess ppl didn't know and the ones that did are making so much money they don't want to share!

Bundbaby - thanks for the history lesson, never thought of it like that. Maybe the yanks will read your post and make the change.

 

[bigba]

hey if you want to chart this in cqg as a decimalised spread, you can put it in as "sharescale(3*fva-2*tya,db)" and then the spread "shares" the bund pricing format, ie becomes decimalised