…for a treasury futures. Anyone clear on the definition?
Yield spreads when comparing two instruments are not constant, they fluctuate, and at different rates - hence the beta. Think of regular beta - lower means less price move than the reference (index) Yield beta relates the YIELD movement to the refernce (CTD bond, future). So when you go to get the hedge ration for the portfolio and the CTD/F (Dp/Dctd), even after you multiply by the conversion factor, you need to apply the yield beta by multiplying it as well. Make sense?