Let's see how the strategy is doing.
The ACM model now (first screenshot) vs. Jan 31 (second screenshot) mimics roughly the flattening of the treasury yield curve.
Unfortunately the positive term premia might be completely eaten by the high treasury futures implied repo rates described here https://home.treasury.gov/system/files/ ... Q12024.pdf and discussed here https://www.withoutwarningresearch.com/ ... asis-trade .
Meanwhile, the SOFR forward curve is abysmally flat, possibly in part due to the same structural issues (artificial demand for duration via derivatives vs. repurchase agreements due to regulatory and reporting biases).
The only hope for the term premium comes from the dot plot, which doesn't seem to be reflected much in the ACM model.
There might be a problem due to structural changes in the market. I have a feeling that a ZB/UB duration-neutral trade might produce much greater carry returns based on the 138 bps 17y/30y forward rate differential, than STIR or ITT positions.
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The ACM model now (first screenshot) vs. Jan 31 (second screenshot) mimics roughly the flattening of the treasury yield curve.
Unfortunately the positive term premia might be completely eaten by the high treasury futures implied repo rates described here https://home.treasury.gov/system/files/ ... Q12024.pdf and discussed here https://www.withoutwarningresearch.com/ ... asis-trade .
Meanwhile, the SOFR forward curve is abysmally flat, possibly in part due to the same structural issues (artificial demand for duration via derivatives vs. repurchase agreements due to regulatory and reporting biases).
The only hope for the term premium comes from the dot plot, which doesn't seem to be reflected much in the ACM model.
There might be a problem due to structural changes in the market. I have a feeling that a ZB/UB duration-neutral trade might produce much greater carry returns based on the 138 bps 17y/30y forward rate differential, than STIR or ITT positions.
Statistics: Posted by comeinvest — Mon Feb 17, 2025 12:56 am — Replies 3408 — Views 812418