Any Bond Traders?

[Alex]

Does anyone here trade the 3-Month Sterling (Short Sterling) Futures contract on LIFFE? I'm interested to know who the big players are and why they trade it.

The standard contract size is £500,000 and the price is based on what the LIBOR rate is predicted to be on the day of settlement. Just like bonds, the price moves inversely to the yield which is 100-x. The minimum tick size is 0.01 which corresponds to a £12.50 change in price.

For example, if you were betting the Bank of England was going to surprise the market by raising the base rate, you would take a short postion. You sell at a price of 95.00 (LIBOR 5%) and a few weeks later the BOE raises rates by 25 basis points. The LIBOR rate moves to 5.25% and you buy the contract back making a profit of £312.50.

(95.00-94.75)/100*£500,000*3/12 = £312.50

[notouch]

I keep my eye on short sterling. It's traded by hedgers and speculators. Hedgers are banks, insurance companies, mutual funds, pension funds and anyone who wants to hedge against interest rate risk. Speculators are hedge funds, investment banks and large traders. You can also trade Gilt which is the equivalent of the US Treasury Bond. Participants are mostly institutional rather than retail.

[Alex]

Regarding bond markets in general: Are there any seasonal factors at work? As we draw to the close of Q2 earnings season, will bond markets take on a more bid tone as investors withdraw from stocks and park their money somewhere less risky over the summer period.

[notouch]

Rotation from stocks to bonds is always a factor but there are no "no brainer" trades. Who's putting money on the stock market rally to end any time soon? Interest rate expectations is what it all comes down to for bonds.

[bakrob99]

	Quote:	Soultrader
	Thank you for the information guys. I really appreciate it. Been observing the 30year bonds and it sure is slow. It does seem to respect MP levels though.

Soultrader - What strategy have you determined might be effective using Market Profile and US 30 Year Bonds?

[robb]

That is a great question. I am also looking to get MP strategies to couple with 30 year bond futures. I have been trading the bonds for awhile now but I am new to market profile. Seems to be a good fit. The 30 year bonds offer a great bang to buck ratio... bonds have been moving 12-30 ticks per day on a trending day at 31.25 per tick per contract...not bad.
I assume the value area strategies should work using VAH, VAL, POC, single prints, etc....can anyone offer ant help?
thanks.

[Soultrader]

I think the best trader that can offer you some insight would be alleyb on this topic. You might want to check out his site too at http://www.tradingclinic.com/index0212.php/

[alleyb]

where do I start for what can become a very lengthy subject.
Any LIBOR based contract whether Short Sterling, Euribor, EuroDollars, EuroSwiss or 3 month Yen of which there are several genres are primarily the domain of the big banks but as previously posted really just about any type of institution is willing to be involved. This is still despite the electronicmogification of the marketplace still a product where the local (albeit upstairs now) is still a major player The volumes transacted are huge and the capability in the LIBORS to be able to trade the packs (groups of 4 quarterly contracts) to create yield curve and TED spread strategies adds to the appeal. The major influence in options these days is likely the hedge funds.
The purpose of the product is to offer a hedging capabilty against or for a directional move in short term interest rates but of course like any tradeable product the spec are just as likely to be involved as they try to anticipate the Central Bank's next move.

[alleyb]

the LIBORS if spread on an inter-market basis mixed in with opposite risk trades in bond markets also offer interesting alternative strategies to trading currencies outright but again this is an area that one could almost write a book on. What I am trying to say is that to their are many different ways to create a currency trade without using the FX

[alleyb]

The 30 year or Long Bond or T.Bond has always had a 90% plus MP or Market Profile correlation. The bond markets were in essence the first guys to really take to MP back in the 1980s and I don't know anyone who trades bond markets again whether that be US, EU, UK or Japanese as these are primarily where the main futures markets are who doesn't have a MP chart up all the time.
as for saying that the 30 yr is slow I think that is a matter of being in the eye of the beholder and suggests something about their trading style.
obviously taking different data sets from the Data Warehouse will produce slightly different results. For example taking S&P since inception in 1982 then the daily ATR is 9.44 per day but taking just 2008 then its 30.56. Doing the same excercise in the T.Bonds starting again with inception since 1977 the daily ATR is 24/32 but taking just 2008 then its 33/32 (1-1/32). The Nice thing about Bond markets is the ability to trade the curve postioning 2 year vs 5 year vs 10 year vs 30 yr in the US and Europe where saily volumes are almost obscene.
Note that the T.bond will move from being traded in 1 tic increments 1/32nd to half tics from March 3rd. Likely impact I am sure will be higher volumes as the flipper brigade spin their wheels looking at the 5 minute voodoo chart even more