T-Bond Futures Trading

Sahil

Junior member
33 0
Hi, I am to start trading T-Bonds soon and was hoping to pick an experienced traders brains?

I will be spreading 30yr/10yr and 10yr/5yr on CBOT. I will be playing around with various ratios. Any ideas on what is working good? Also do the T-Bonds spread good against say Eurex bonds or CME Eurodollar?

Ideas appreciated! Cheers in advance!
 

BBB

Experienced member
1,071 3
How long are you thinking of holding these for?

Are you trading these based on TA or fundamentals?

I've looked at Eurodollar spreads, and am getting some thought together on that (slowly)- and will probably extend the strategy to the bonds too. Who are you using for brokerage?
 

Sahil

Junior member
33 0
I'll be trading intra-day. Trading strategy pre-dominantly on fundamentals, with the occasional look at technicals. Fimat for brokerage.

Understand a roundbout ratio 1.5 - 1 works well on intra-days. Like the look of 10/5 yr spread - don't know much about eurodollars, will start investigating in near future.

Let me know your thoughts - thx.
 

BBB

Experienced member
1,071 3
What are you basing the ratio on? Is it the recognised spread ratio for reduced margin?

I know a lot of the guys in the prop houses are just taking a tick, and closing out 60% of their trades for scratch. They depend on doing a lot of size - so they need low low costs. Are you looking more at a longer intraday trend (like me), or attempting the prop shop model from home?

I will probably base my trades on support resistance. Looks too easy though - if it were we'd all be doing it. Maybe it is?
 

josbarr

Active member
214 2
Are you looking at the TED or NOB spreads ?
 

Sahil

Junior member
33 0
I'm looking at both at the moment (TED being 10/5 yr rite? - we call it FITE over here!)- NOB seems only good in times of 'action'.

I'll be looking to close out trades the prop shop way, but will be working towards longer intra-day if it suits me when more experienced. The spread ratios mentioned have been 'working' since early 80s in the pits to this day. Apparently ppl trade them both intraday and overnights.

I'm not having much luck with the NOB, but FITE seems ok. Market has been relatively quiet last few trading days though.

I thought there'd be quite a lot of ppl trading these spreads, especially the Chicago boys?!
 

okubo

Newbie
7 0
1. Basis Point Value equivalent. This way, you are betting on the yield curve movement, not bull or bear on whole bond market. Calclated from cheapest to deliver bond. You can get this from bloomberg (my family have).

2. Correration. If you can get Y=2.2X-130.11 on T-Bond(Y) and 5Y-Note(X) in last 2month, you may buy 100 T-bond and sell 220 5Y.
 

mjb1007

Newbie
2 0
.Although the analysts tell us that it has moved to 1.8 to 1 recently. Most prop boys have been trading the FITE and NOB intra day trade 1.5 to 1 for as long as I can remember though and probably wont change.

Hey, my advice is to leave the US stuff alone and trade EUREX Schatz, Bobl and Bund 7:3:2. I find them much better to trade than CBOT on the screen + you can get much more size on.
 

tbill

Junior member
25 0
Sahil,

I traded Fites and nobs on Project A from 1993 to 2000, first on Globex and then on Project A. That being said the game has changed so much due to better frontend software and due to the increased cost of trading that I cannot give you any specific advice.

Just be mindful of the cost per trade because spread trading is might produce a higher percentage of winners than scalping but the costs are quadruple.

Also, learn how to use the legging functions on your software.

Good luck.
 

josbarr

Active member
214 2
PPI data was highlighted by a much larger than expected 0.8% increase in core-PPI (consensus +0.2%).... Treasury market not a fan of the number.
 

ducati998

Experienced member
1,193 68
Investor's Business Daily
Dread The Spread
Tuesday February 15, 7:00 pm ET
Ibd

Fed Policy: The spread between long- and short-term interest rates -- the yield curve -- is one of the best forecasting tools available. As such, you may be interested to know what it's saying right now. It isn't good.
When Fed Chairman Alan Greenspan delivers his semiannual economic outlook to Congress Wednesday, he's expected to talk about the dollar, jobs, trade, inflation, debt and savings, among the many other things he keenly follows.

Well, we hope he doesn't leave out the yield curve.

In brief, the yield curve shows how short-term interest rates compare to long-term rates. Normally, it slopes gently upward, with short-term rates well below long-term ones.

But when the curve flip-flops -- or "inverts," in economics lingo -- watch out. It usually means the Fed, which controls only short-term interest rates, is slamming on the brakes.

Every recession since 1960 has been preceded by an inverted yield curve. Only once -- in 1966, when the economy scraped the runway but didn't crash-land -- did an inverted curve fail to predict a slump.

Today, one widely followed measure of the yield curve is coming perilously close to going negative (see chart). That means slower growth ahead.

That's not just a guess. A number of recent studies have confirmed the yield curve's uncanny ability to predict economic trends.

If so, the Fed should watch its step. Bond market observers have watched in amazement as yields on long-term bonds have continued to fall to near 4%. Meanwhile, the Fed -- with Greenspan leading the way -- has raised short-term rates six times since June.

They now stand at 2.5%. If the tightening continues even at a "measured" quarter-point pace, they'll be just below 4% by summer's end. That may be enough to send short-term rates crashing through long-term rates, the equivalent of shoving the economy into an anti-inflationary, anti-growth ice bath.

Some Wall Street commentators suggest this time is different. Interest rates and inflation are so low overall, they explain, that any rises in short-term rates are likely to have minimal impact.

But interest rates are a relative thing. If the Fed continues to hike rates as it has since last June, short-term rates will soon be nearly three times their year-ago level. In relative terms, that's a big hike -- one that could send the recovering stock market, housing and retail sales reeling.

Chairman Greenspan, watch out! Your last month in office is January 2006. It would be too bad if your legacy was handing your successor an economy in recession
 

ducati998

Experienced member
1,193 68
Well, I'm happy to tell you that a new day may be dawning. Having touched 3.97% last week, the yield on the benchmark Treasury has bounced back to as high as 4.27% on Friday. I think that's an important reversal, and it's pretty obvious why it has happened.
Alan Greenspan's Senate testimony on Wednesday gave bond bulls no reason to think that the Federal Reserve has any intention of halting its program to raise interest rates by at least 25 basis points at every FOMC meeting. That's going to put short-term rates at 4.25% by the end of 2005 -- and unless we get an inverted yield curve, bond yields are going to have to move considerably higher as the short end ratchets up.

Greenspan made it clear that the era of ultra-low interest rates was an emergency measure -- one if kept in place too long would lead to unacceptable growth in inflation. It's time, he strongly suggested, for rates to get back to normal. The bond market has been deluding itself by thinking that there is no inflation risk out there -- and sustaining the illusion by believing that Greenspan doesn't see any risk either. Wednesday made it clear that Greenspan does see the risk.

And Friday morning made it clear that the risk is clear and present and banging on our front door. The core Producer Price Index surged to 4.77% on an annualized three-month basis. On a year-over-year basis, it jumped to 2.71% -- and you have to go all the way back to 1992 to see a number that ugly.

Greenspan called the persistently low yield on long-term bonds a "conundrum" and described it as a "short-term aberration." Sound familiar? It should. Remember when he warned of "irrational exuberance" in the stock market? Well, it's the same thing, but now it's "aberrational exuberance" in the bond market.

Yes, it took a long time for Greenspan to get his way with stocks, to burst the bubble of the late 1990s. He did it by raising interest rates relentlessly, and eventually the bubble burst. I don't think it will take anywhere near as long with today's bond bubble. The bond market is much more directly sensitive to interest rates. If Greenspan keeps the pressure on, bonds will cave soon enough. I think it's already started
 

ajay

Junior member
10 0
Hi Friends,

I am finding a Diamond Pattern in Monthly charts of 10 yr. TB. I am in doubt about it. Can anybody help me? If a perfect diamond is not formed, definitely there will be a good triangle that can be seen on these monthly charts. Please apply the Black Template if you use Metastock to see these charts.It looks more clearer in that color.
Thanks
Ajay
 

traderkenny

Active member
106 4
you may check out this site for more about CBOT. BondTRadingTips provides Everything you ever wanted to know about CBOT interest rate futures markets.Treasury bond futures contracts are an important part of learning how to trade futures and have their own interest rate fundamentals and are important to people who are interested in how interest rate hedging and government bond futures work.

best regards,
 
 
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