That is what Corey in the RR forum did using Bloomberg data; but the result was not consistent with other data points regarding futures replication cost.I have always thought that the most straightforward way to calculate the futures replication cost is to track the returns of the CTD of a Treasury Futures contract, and compare them to the returns of that Treasury Futures contract fully collateralized by Tbills or reverse repo or whatever. If the CTD changes, then track the returns of the new CTD from that point onward. The only problem is getting the data. But this kind of thing should be possible in principle with the IB API.
Also, I don't know if you also follow the related thread in the Rational Reminder forum https://community.rationalreminder.ca/t ... -investing , but there was a discussion recently with some more insight on treasury futures implied financing rate, or futures replication cost.
A caveat with this methodology are that CTD bonds might represent systematic biases in comparison to an unbiased set of constant or similar maturity treasury bonds, for example that they are typically cheaper as they are in higher demand; but that effect is not big according to a chart from a TBAC study that I posted earlier in this thread. Another caveat is that CTD switches when they occur might introduce some systematic bias. If the current CTD at any given time is the "most expensive" (highest IRR by definition), then a CTD switch means the former CTD "underperformed" the new CTD, implying that there is a systematic bias to "underperforming" bonds? I'm not sure if this is true, or if "expensive" and "cheap" is mostly an artifact of the conversion factor convention.
Statistics: Posted by comeinvest — Thu Mar 13, 2025 5:40 am — Replies 3458 — Views 857512