what is month end extension in fixed income markets?

[jagat]

I am trading Euribor and bund and schatz on liffe.
however i do not know the meaning of month end extension. please reply if u know anything abt it.here at my office everyone has observed that on month end extension day 10 years rally. Is it true?

 

[jagat]

very bad people are viewing the thread but not replying.

 

[Martinghoul]

If you're an investor and want to invest in bonds, you can buy a fund that tracks a bond index (such as iBoxx EUR Sov index or the Leh, now Barclays, UST Index). These bond indices are affected, in the obvious manner, by issuance of new bonds, on the one hand, and by passage of time/coupon payments/redemptions on the other. Normally, these changes in the index mean that a passive index tracking bond portfolio that was exactly in line with its index at the beginning of the month won't be at the end of the month. Index fund managers normally rebalance their portfolios at the end of the month, which normally results in an extension (especially nowadays). Does that make sense?

 

[jagat]

thanks Martinghoul

 

[jamaise321]

very good to see the site.
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