Tom, Tony and Pete take a look at trades in Treasury Futures.
Possible curve trades are “flattener” and “steepener” strategies consisting of getting long/short near-term (front) and long-term (back) bonds. The yield curve can flatten in some of the following ways:
The first is referred to as a “bull flattener”, or a situation where the 2-year and 10-year yields both fall, but the 10-year decline is greater in magnitude.
Secondly, the reverse, or “bear flattener”, can occur. This is when the 2-year and 10-year yields both rise, but the increase in the 2-year yield is larger in comparison. There are a variety of different yield curve relationships to choose from in Treasury Futures:
“TUT” SPread: 2-year versus 10-year maturity.
The “FITE” Spread 5’s vs. 10’s
The “NOB” spread: 10’s vs 30’s
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