Collateral yield - Futures

The collateral is invested in plain vanilla Treasury bills, right ? Or are they invested in TIPS ?

the margin is invested in Treasuries.

^Agree. You earn the collateral yield by placing 100% of the value in Treasuries.

My reference is a question in CFA Freebie exam, where one guy makes a statement that in addition to the commodity spot return, the collateral yield is a inflation-hedge too. And apparently, he is correct.

He’s just saying that rolled T-bills should provide a return that is something like inflation. However, if you wanted to get TIPS returns on collateral every big bank in the world would be happy to do a T-bill/TIPS index swap.

^ Thanx. Makes sense.

sources of return from commodities: 1. spot return 2. roll yield (only positive when in backwardation) 3. collateral yield. sorry I couldn’t help myself.

Gold star.

yey! from you that means a lot…