alphabetroulette| Morgan Stanley Fund Wu Huiwen: Treasury bond futures are a spear, increasing short-term bond yields

Author: Wu Huiwen, fixed income Investment Department of Morgan Stanley

The investment scope of short-term pure debt funds generally does not include treasury bond futures because the asset volatility of the category does not match. And this variety is the "spear" of assets for all bond investors, because its price signal is the most continuous, and there is volume and price information of transactions every second, while in the indicators of current bonds, these information is discontinuous. You can see the price jump of the day. Since the listing of Treasury bond futures (TL) in the past 30 years, the rhythm of current bonds driven by futures is very obvious. Although short-term debt track products cannot apply the strategy of treasury bond futures,AlphabetrouletteWe can use it as a tool to assist in trading.

I have been tracking the strategy and development and application of treasury bond futures since 2013. Pure debt investors do treasury bond futures. At the beginning, the barriers are very high, because there are tops and bottoms on bonds, and the bottom line is not very flexible. However, when the yield of treasury bond futures is relatively high, it is often when there is a big correction in the market, and it is easy for pure debt investors to get off on the left side. However, the advantages of pure debt investors in participating in treasury bond futures are also obvious. first of all, they have a very clear framework for macro investment, that is, the pricing of existing bonds, and the analysis of liquidity, fundamentals, policy aspects, supply and demand, valuation curve, riding, and so on. the choice of different key periods is more clear than that of futures players. Therefore, the overall advantage of pure debt investors is that they can carry out top-down macro fundamental analysis and institutional behavior analysis, while they need to make up for the analysis of technical aspects such as trading signals. In the implementation of the futures strategy, the position is the line of life and death, which is more important than the direction. in the gridding construction of the position, the rhythm, upper and lower limit level and trading discipline are very important.

In practice, I suggest to do some simulation combinations, such as arbitrage, arbitrage, positive and negative basis, intertemporal, spread, butterfly strategy, etc., through the management of positions and income fluctuations, we can get started more quickly. As the only hedging tool in the market, the threshold of treasury bond futures relative to interest rate swaps (IRS) is low, because IRS has to do NAFMII credit, the transaction cost is high, and the friction between the two ends of the transaction is very large. On the other hand, treasury bond futures are leveraged and the market capacity is not too large. since the beginning of this year, the margin of 30-year treasury bond futures is only more than 1 billion yuan. Some price signal characteristics on this scale are relatively easy to identify. In addition, the efficiency of the use of treasury bond futures funds is also very high, especially when micro-disk stocks fall sharply before the Spring Festival, quantitative funds mostly choose to do TL or ETF of interest rate debt. At present, the market capacity of interest rate debt ETF is about 20 billion, ETF can pledge financing, hedge more than three times, and funds sell interest rate debt ETF on the same day, but also can be switched to currency ETF, stocks, etc., so that the efficiency of the use of funds is maximized. Therefore, the importance of ETF and treasury bond futures may increase in the future, and the size of the market will continue to expand.