Help with bond terminology

[mr-T]

Hi Everyone!

I'm struggling to find any information on the web on the following terminology commonly used in the world of Fixed Income:

*Basis tightening

*Long basis - I know what long means, but not when used in this context

*Long duration - ditto

I have read that long basis benefits from tightening of bond yields. Can any help me out with an explanation of any of these? I feel like an alien at the moment.

Thanks,

mr-T

[Soultrader]

One basis point is equal to 0.01%. When the fade cut its rates recently by 25 basis points, this means by 0.25%.

Duration means the change in value of a financial instrument that will result from a 1% change in interest rate.

Long-basis means owning a commodity but being short the futures to hedge. The basis is just the difference between the price of the physical commodity and the futures.

[aiki14]

This might help:

http://www.investinginbonds.com/

[Richard III]

This web site may prove useful. http://www.investopedia.com/

Richard

[mr-T]

Thank you for all your help.

I come with information. With regard to 'long basis' in relation to bonds, this means going long the bond and long CDS. The term 'basis' is a generic term to indicate the risk of an imperfect hedge. In the case of a bond and a CDS, the risk is that the bond's yield curve moves in a different way to the assicoated CDS curve, thereby creating an unpredictable shift from the direction you intend in order to make a profit.

Thanks,

mr-T