last level i saw was 167. is there anyway an individual investor can trade this? buying eurodollar futures?
Our bond guys were beside themselves today looking at that and other spreads that have simply blow out.
contango1 Wrote: ------------------------------------------------------- > last level i saw was 167. is there anyway an > individual investor can trade this? buying > eurodollar futures? That works.
so i am thinking for a convergence trade buy the dec08 eurodollar contract and short the 2yr tsy future? is there enough liquidity in the 2yr tsy future to get that done? or is there a better way to trade the spread?
^ Both are highly liquid.
That’s right that both are highly liquid. You can trade thousands of 2-yr treasury contract with minimal trouble. Be careful about that convergence. 1) A Treasury contract is deliverable and Eurodollars aren’t so there are delivery issues 2) A Eurodollar contract is a contract (sort-of) on a forward interest rate, not a bond. In particular, the duration of the two-year note contract is much higher than the ED future and depends on the CTD note. 3) A ED contract has the convexity bias problem for hedging bonds which means you can get nailed by convexity even if you could get the duration thing exactly right. You can do this kind of thing but you might want to get some advice before you do it.