A couple of quick hits here, September is off to a good start for both Bonds and Equities here. US Treasury yields falling across the board with the US Govt 10Y back to trading 0.67%, -3.3bp on the day, with a curve moving in a flatter front end shift today.
For those that don’t know, Steepening is front end duration (ED,TU,FV) or 3 months to 5 years outperformance price wise vs the mid and longer end (ZN,TN,ZB,UB) 10yr and out contracts. A flattening would be the reverse of that and a parallel shift is a neutral move given the specific weights of each contract vs one another. For instance the ratio of a 5y30y is 4:1 (0.25)
This trade is commonly referred by many as the “FOB” and for a parallel shift in the futures curve, would mean that if the 5yr future is +1, the 30y future should be +4.
Using the snapshot from Tradingview below we can see the ZF (5y future) is +1 and the ZB (30y future) is up 21.
So the 5s30 is 4.25 ticks weak (flatter) as the FV should be up 5.25 and is only up 1…
