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So you are contradicting your previous post where you mention that the TY volume is "stable" compared to bunds.
My point here i guess is that while both volumes have dropped the bund drop is more serious as the volume is generally lighter therefore much less liquidity than before.
Can you help answer these questions from other members on NexusFi?
I am not entirely contradicting my previous post. If you take into account longer maturity treasuries, than there is no decline at all. That suggests that buying interest has shifted from the 10-year notes to 30-year bonds.
If you look at the rolling monthly volume, there is no decline in the trading volume of 30-year bond futures.
This may well be explained with the large-scale asset programs, which the FED had started under its Quantitative Easing policy. The QE2 asset purchase program was completed in June 2011 and included $ 600 billion of longer-term securities. It was then followed by the maturity extension program dubbed "operation twist".
The first two rounds of QE had too little impact on longer-term yield. By buying the longer term treasuries the FED probably has achieved two targets
-> increasing the price of longer term securities, thus flattening the long end of the yield curve
-> increase the market share of longer term securities compared to treasury notes
The volume in futures may have simply followed the shift in the secondary market of the underlying treasuries.
Below attached is a chart, showing that volume in bond futures has actually risen in 2012 compared to 2011. Further I have found a comprehensive paper analyzing the impact of the Operation Twist 2 on the term structure of yields.
"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter
Eurex Exchange's interest rate derivatives segment totaled 33.2
million contracts (July 2011: 54.9 million). The Euro-Bund-Future
reached 13.0 million contracts, the Euro-Bobl-Future 7.6 million
contracts and the Euro-Schatz-Future 5.7 million contracts. The Euro-
BTP-Future grew by 81 percent y-o-y and totaled around 474,000
contracts; and the Short Term Euro-BTP-Future reached approximately
86,000 contracts. The Euro-OAT-Future – launched in mid April –
recorded a new monthly record with around 431,000 contracts.
Taken from the Eurex website.
Clearly a massive drop from July 2011.
Overall the average daily drop was 20% compared to July 2011
