Is bund calendar spread stuck ?

[jas-105]

I've been watching the bund futures Sep/Dec spread for the last week or so and every morning there are orders of 50k lots each side on bid and offer but next to nothing has traded in all that time. I really dont know how this is priced , but is there any reason for the lack of trading considering the size ?

 

[Anonymous]

orders of 50k lots each side on bid and offer but next to nothing has traded in all that time

Possibly those are the market makers' orders. If all those orders are placed by market makers, you don't expect any of the market makers to take something quoted by some other market maker, if you know that that quote is not going to give you an advantage.

 

[$spreader]

jas-105
Actually the September contract doesn't expire until the 8th September so don't expect the spread to pick up in volume until the beginning of that week - even when the spread starts to trade actively it will still be 50K up so it's all about being up the front of the queue - I assume that is where this volume is coming from.

 

[jas-105]

Thanks for reply. How come it hasnt changed in price though, I would have thought it would move at least a little bit alongside the underlying ?

 

[$spreader]

The underlying will affect the price of Sep and Dec as individual months but they will just go up or down together not having that much of an impact on the spread price - the spread is really an instrument for the people holding larger positions who need to roll them over into the next delivery month and considering the amount of volume that trades in the spread and the daily volatility of the bund,the spread is actually not very volatile and will be bid and offered in huge size,mostly paper,for the run-up to Sep expiring.