WHAT'S NEW?

FINANCIAL MARKET COURSES

Bond Futures Basis

Futures contracts are often used in fixed income markets as a risk management tool. To know how to use these instruments correctly, it is essential to understand the concept of bond futures basis. This is the difference between the futures and the cash price for an underlying government bond.

 

This course defines bond futures basis and identifies its sources. It also describes how basis evolves over time and analyzes the changes in the cheapest-to-deliver bond.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Define bond futures basis and identify its sources

    Recognize how basis evolves over time

    analyze how the cheapest-to-deliver (CTD) bond changes over time

  • COURSE OUTLINE

    Topic 1: Basics of Bond Futures Basics

    What is Basis?

    Sources of Basis

    Calculating Gross and Net Basis

    Factors Affecting Basis

    o Implied Repo Rates

    • Cash and Carry Arbitrage

    o Conversion Factors

    • Using a Conversion Factor

    • Cheapest-to-Deliver (CTD) Bond

    o Gross Basis

    • Net Basis

    Putting it all together

    Topic 2: Evolution of Basis over the Life of a Contract

    How Basis Evolves for Different Deliverable Bonds

    Calculating the Implied Repo Rate

    Market Trends in the Implied Repo Rate

    Topic 3: Cheapest-to-Deliver Bonds

    Conversion Factor Bias

    o Exchange-calculated Conversion Factors

    o Market-based Conversion Factors

    Differences between Conversion Factors

    CTD Bond Changes

    Parallel Yield Curve Shifts

    Direction of Yield Shift

    Parallel Shift Example

    Yield-to-Maturity shifts on Specific Deliverable Bonds

    Changed in Repo Rates

    Issuance of New Bonds

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

Next Course

VIEW COURSE

INTERMEDIATE

Support

Accreditations

General: info@intuition.com

Accounts: ar@intuition.com

http://support.intuition.com

Intuition engages with over 30 accreditation bodies to ensure Know-How can be used for CPE credits. If your organization needs CPE from a body not listed below, contact us and we will endeavour to have them included.

© Copyright 2016 by Intuition. All Rights Reserved.