Tutorial Questions – Bond futures
• US Treasury securities with at least 15 years and less than 25 years to maturity are deliverable into a $100,000 futures contract size describe:
• 5-Year Notes
• 10-year notes
• Classic T-Bond
• All the above
• A US Treasury note futures quote of 101-20 is equal to
• 101.064
• 101.20
• 101.3125
• 101.625
• What is the main difference between on the run and off the run Treasury securities?
• The on the run is the most recent issue
• Off the runs are less liquid
• On the runs can trade at a slightly lower yield and higher price due to a liquidity premium
• All the above
• Which of the following is NOT an option open to the party with a short position in the Treasury bond futures contract?
• The ability to deliver any of a number of different bonds
• The wild card play
• The fact that delivery can be made any time during the delivery month
• The interest rate used in the calculation of the conversion factor
• The cheapest to deliver (CTD) has
• The lowest net basis
• The lowest implied repo rate
• The most recent issue date
• The closest price to the futures contract
• If a US Treasury trader is long 10 Year notes and they sells 10 Year note futures against the position, they are:
• Completely perfectly hedged
• Long the basis
• Short the basis
• Have two separate unrelated trades
• The implied repo rate is
• Lowest with the lowest basis
• Highest with the lowest basis
• The negative carry from making delivery
• Depends on the funding rate
• The CTD is usually delivered against the short bond futures position because:
• It is the cheapest bond to deliver
• It has the least loss from delivery process
• It has the highest implied repo rate
• All the above
• The most recent settlement bond futures price is 103.5. Which of the following four bonds is cheapest to deliver?
• Quoted bond price = 110; conversion factor = 1.0400.
• Quoted bond price = 160; conversion factor = 1.5200.
• Quoted bond price = 131; conversion factor = 1.2500.
• Quoted bond price = 143; conversion factor = 1.3500.
• A portfolio is worth $24,000,000. The futures price for a Treasury note futures contract is 110 and each contract is for the delivery of bonds with a face value of $100,000. On the delivery date the duration of the bond that is expected to be cheapest to deliver is 6 years and the duration of the portfolio will be 5.5 years. How many contracts are necessary for hedging the portfolio?
• 100
• 200
• 300
• 400