masterchanger 

the 10y yield is essentially the inverse of the 10y note. just plot both and you'll see.

While they are highly inversely correlated, the relationship actually isn't linear.

masterchanger 

Does anyone have a reference for the t-bond, t-note conversion to yield. I’m interested in transforming a continuous bond/note contract into yield terms so that I can look at historical data and maybe use that to develop an automated trading strategy.

TWDsje 

I've done a bit of work trying to sort out what the correct interest rate would be based on the larger futures, but there's more variables involved that make it difficult to calculate using the data we have available. You could use the dv01 to determine how much a 1 tick change in the futures should move the micro futures, but the problem is dv01 changes. I would have though that difference would be negligible, but it actually changes enough through the day that you can't just use the numbers you get from CME's free treasury analytics tool. The right way to do this would probably be watch the cash market with CME broker tec data, but I'm having a very difficult time finding retail access to such data.

In Bond Math, two of the most common/important concepts are 'Convexity' and 'Duration'. Convexity addresses the non-linear relationship between price and yield. Duration addresses how maturity effects the the relationship between price and yield. DV01 is a standardized measure of how much price is affected by a change in yield. In theory DV01 captures both the convexity and duration. but in reality the convexity is so small for a small change in yield, that it primarily captures the duration risk. The reason DV01 occasionally changes though is because of convexity.

Obviously different futures, reference different maturity bonds. What people may not realize is that their is also a referenced coupons which for the 10yr note is 6%. The price of the ZN 10 year Treasury future, is the price of a Treasury Note, yielding 6% with a maturity between 6.5 and 10 years in the future. So in reality ZN actually behaves more like a 7 year bond than a 10 year bond. CME added a "Ultra 10 Year US Treasury Note" TN the price of which is the price of a Treasury Note, yielding 6% with a maturity between 9.5 and 10 years in the future. While not as big as ZN, NT does trade 200,000 contracts a day.

TLDR: The answer to the question involves calculating the implied yield of an approximately 7 year to expiry 6% Treasury Bond given the futures price.

Unfortunately calculating implied yield from price, is a lot more complicated than calculating price from yield but I'll let you solve that problem.

Fluid Fox 

Here's a list of all the micro products going by the PDF above: MES - S&P 500 MNQ - Nasdaq-100 M2K - Russell 2000 MBT - Bitcoin M6A - AUD/USD M6B - GBP/USD MICD - CAD/USD M6E - EUR/USD MIJY - JPY/USD MYM - Dow Jones Index 10YR - 10 Year Yield 30YR - 30 Year Yield 5YR - 5 Year Yield 2YR - 2 Year Yield MGC - Gold MCL - Crude Oil FDXS - Dax FSXE - Stoxx Agricultural products next?

Look at this price action lately in Nat Gas, an NG Micro is needed badly! QG mini trades in 5 cent increments, is not very liquid, and a 1 tick slippage means 15 cents to cross the spread vs NG!

Futures Operator 

Look at this price action lately in Nat Gas, an NG Micro is needed badly! QG mini trades in 5 cent increments, is not very liquid, and a 1 tick slippage means 15 cents to cross the spread vs NG!

Urhhh No. Your off by a decimal.
NG is 10,000 MMBtu and has a $0.001 tick which is $10
QG is 2,500 MMBtu and has a $0.005 tick which is $12.50
All the ICE Natural Gas Products are either 2500 MMBtu per day or per month, so this product probably isn't going away or being replace by a micro but I could be wrong.
It used to be extremely liquid, mostly 1 maybe 2 ticks wide, but with these massive moves (1237 tick range in NG today!) and 10 tick wide bid-asks in the main NG contract I wouldn't be surprised if the market makers (read: High Frequency Arbitrageurs) have all pulled back (at least to sniper only). Will check tomorrow.

CME did announce Micro Heating Oil (MHO) and Micro Gasoline (or Reformulated Blendstock to be accurate) (MRB) last month. I'd be surprised if they trade though, QH and QU the eMini's have zero volume. Like most of the new Micros they will also be very expensive to trade in relation to the full size contracts.

https://www.cmegroup.com/content/dam/cmegroup/notices/ser/2022/06/SER-8996.pdf

SMCJB 

Urhhh No. Your off by a decimal. NG is 10,000 MMBtu and has a $0.001 tick which is $10 QG is 2,500 MMBtu and has a $0.005 tick which is $12.50 It used to be extremely liquid, mostly 1 maybe 2 ticks wide, but with these massive moves (1237 tick range in NG today!) and 10 tick wide bid-asks in the main NG contract I wouldn't be surprised if the market makers (read: High Frequency Arbitrageurs) have all pulled back (at least to sniper only). Will check tomorrow. CME did announce Micro Heating Oil (MHO) and Micro Gasoline (or Reformulated Blendstock to be accurate) (MRB) last month. I'd be surprised if they trade though, QH and QU the eMini's have zero volume. Like most of the new Micros they will also be very expensive to trade in relation to the full size contracts. https://www.cmegroup.com/content/dam/cmegroup/notices/ser/2022/06/SER-8996.pdf

Thanks, Micro Crude also overtook Mini Crude, which was active, so there is hope Micro RB and HO do also. Good to know on the QG decimal being half cents, but actually trading it lately, it is not useful for anything except long term positions and hedging, a micro would be much better still, hope that comes as well.

The 5x tick size on QG (Natgas eMini) is a killer for retail and a gift for arbitrageurs. QM (Crude eMini) isn't quite so bad at 2.5x (but still a gift for arbitrageurs), but the contract being just half the size still makes it a very big contract. I think that large contract size is a reason for so much of the QM liquidity moving to MCL so quickly.

CL is 1000 barrels, with tick $0.01 = $10
QM is 500 barrels, with tick $0.025 = $12.50
MCL is 100 barrels, with tick $0.01 = $1

SMCJB 

While they are highly inversely correlated, the relationship actually isn't linear.

It may not be linear but I found that relationship interesting! Cheers!



2022-06-11_07-20-19

SMCJB 

While they are highly inversely correlated, the relationship actually isn't linear. In Bond Math, two of the most common/important concepts are 'Convexity' and 'Duration'. Convexity addresses the non-linear relationship between price and yield. Duration addresses how maturity effects the the relationship between price and yield. DV01 is a standardized measure of how much price is affected by a change in yield. In theory DV01 captures both the convexity and duration. but in reality the convexity is so small for a small change in yield, that it primarily captures the duration risk. The reason DV01 occasionally changes though is because of convexity. Obviously different futures, reference different maturity bonds. What people may not realize is that their is also a referenced coupons which for the 10yr note is 6%. The price of the ZN 10 year Treasury future, is the price of a Treasury Note, yielding 6% with a maturity between 6.5 and 10 years in the future. So in reality ZN actually behaves more like a 7 year bond than a 10 year bond. CME added a "Ultra 10 Year US Treasury Note" TN the price of which is the price of a Treasury Note, yielding 6% with a maturity between 9.5 and 10 years in the future. While not as big as ZN, NT does trade 200,000 contracts a day. TLDR: The answer to the question involves calculating the implied yield of an approximately 7 year to expiry 6% Treasury Bond given the futures price. Unfortunately calculating implied yield from price, is a lot more complicated than calculating price from yield but I'll let you solve that problem.

I've been testing with both TN and ZF as the spread in 5yr gets pretty silly sometimes. The CME tool gives you stats for both the cheapest to deliver and the on the run issues. However, the data you see through the tools on the CME website is delayed. So you have to figure out how things have changed since the last snapshot you got.

dollar change = (last close price - anchor price) * instrument's tick size
yieldchange = (dollarchange / DV01) * .01
Yield = anchor yield - yieldchange

So presumably just using the DV01 provided by the CME tools is not sophisticated enough. The further away from the snapshot price you get the less accurate it will be. Certainly not accurate to within a tenth of a basis point at least.