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What you are speaking of is the basis, the difference between the cash and
futures price. An interesting note is that the cash govies are traded in
yield and the futures are traded in price. there is no yield on the futures
so the futures uses a calculation that approximates the yield based on the
cheapest to deliver. The cheapest to deliver is usually a 20 year (or less)
so the futures really approximates a 20 for the 30 year futures and so with
the 10 yr. and 5 yr. futures, etc. The cash guys trade yield because its
the only way to compare apples to apples for one coupon to the next. Trading
the basis is really trading the yield curve due to the difference in
maturity.
ex 5 yr basis trader,
tom
-----Original Message-----
From: Yuri K <ure1@xxxxxxxxxxx>
To: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Monday, October 05, 1998 2:24 PM
Subject: Re: How to calculate Bond Yields
>>Jay,
>>
>>There really isn't a way. There is a cheapest to delivered bond that can
>>be used, but since a variety of securities can be delivered the futures
>>price alone isn't enough.
>>
>>At 12:44 PM 10/5/98 -0600, Jay Becker wrote:
>>>Does anyone know the formula to calculate the yeild, on the 30 yr bond,
>>>based on the trading price?
>>>
>>>Jay Becker
>>>
>>>
>>Stewart Taylor
>>Taylor Fixed Income Outlook
>>Voice: 501-219-9774
>>Fax: 501-228-0963
>>E-Mail: staylor@xxxxxxx
>>Web Site: http://www.cei.net/~staylor/
>
>Really, what about the spread between actual and implied yield then?
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