|How Cheapskates Figure |
Why an old Treasury bond (the Feb. 15, 2015 bond) and not the active long bond (the Feb. 15, 2029 bond) is the cheapest to deliver against the futures contract, even though the active bond's quoted price is lower.
|Maturity||Coupon||Quoted price||Accrued interest||Full price*||Factor||Futures invoice price**||Deliverer's profit or loss***|
|Feb. 15, 2015||11.25%||148.56||1.41||149.97||1.28||148.65||-1.32|
|Feb. 15, 2029||5.25||88.87||0.66||89.53||0.69||80.03||-9.50|
|*Quoted price plus accrued interest. **Futures price times factor, plus accrued interest. ***Full price minus futures invoice price. Data as of July 29. Source: Chicago Board of Trade, GovPX.|
|A Moving Target |
How changes in yield make one bond or another the cheapest to deliver against the futures contract.
|Maturity||Coupon||Duration (years)||Price||Price if yield||Factor||Converted price||Converted price if yield|
|shed 25 basis points||added 25 basis points||shed 25 basis points||added 25 basis points|
|Aug. 15, 2021||8%||11.17||119.625||123.083||116.309||1.2398||96.487||99.276||93.8126|
|Aug. 15, 2019||8.125||10.38||119.844||123.113||116.698||1.2505||96.609||99.244||94.073|
|Aug. 15, 2022||7.25||11.39||111.187||114.465||107.952||1.1523||96.492||99.336||93.6839|
|Data as of July 29. Source: Chicago Board of Trade.|
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