Chapter 154 The Mystery of Treasury Yields

  The first thing Zhong Shi did when he returned to Chicago was to short the yen. After all, he signed an off-market bullish yen option with his opponent. The best way to hedge is to enter the market and short the corresponding amount of yen futures.

  The trading volume of yen futures is the largest in CME, with a daily trading volume of about 50,000 to 60,000 lots, and the corresponding underlying amount reaches 5 to 6 billion U.S. dollars. This is a huge market comparable to the crude oil market.

The target of a standard yen futures contract is 12.5 million yen, which is equivalent to more than 110,000 U.S. dollars. However, after studying the option contracts of CME, Zhong Shi gave up because the yen futures only have four quarters at the end of the quarter. It can be traded in two months, so if you want to buy or sell in February, you may not be able to sell it, and the number of transactions is not active enough. After all, if he enters the market, it is estimated that he will use more than 100 million US dollars of funds.

  The top priority is to enter the long-term U.S. treasury bond market, especially when the Fed announces interest rate hikes. The future direction of the treasury bond market has become somewhat clear.

   "Ten years or thirty years?" Zhong Yi asked cautiously on the phone. As a prospective Ph.D. in economics, he is naturally very familiar with the interest rate mechanism, and he is also very familiar with U.S. Treasury bond futures.

  The 10-year treasury bond is the most important trading part in the market, because there is a subtle relationship between it and the long-term interest rate. It is generally believed that the yield of the 10-year treasury bond is the standard reference for the long-term interest rate.

   "Let's do a 10-year one. Although the volatility will be smaller, it is conducive to entry and exit." Zhong Shi thought for a long time before making up his mind. "You can use the name of Tianyu Fund, and then call a group of people, just in Chicago."

"Okay, then I'll execute it right away." Zhong Yi was very excited. He had faintly realized that Zhong Shi would make another big move in the future, but he didn't know what would happen this time, and he was full of anticipation .

   Soon, the Hong Kong team arrived in Chicago. They first rented a working space in an office building in the Loop District. It is not far from the three major exchanges, and you can even see the building of the exchange when you look up. The funds were also in place, this time a total of 700 million U.S. dollars, which almost moved most of Tianyu Fund's property.

When Zhong Shi walked into the office, which was almost furnished, almost everyone stood up and looked at the young man. Zhong Yi had already mentioned Zhong Shi's physical characteristics before, so when these people saw Zhong Shi I recognized it when I was a stone.

   "Is everything ready here?" Zhong Shi smiled and waved to the traders, and entered a conference room with Zhong Yi, Liao Xiaohua and others.

"It's almost there!" After Liao Xiaohua finished speaking, he pointed to a thin, pale middle-aged man beside him and introduced to Zhong Shi: "This is Louis Zheng. He is an expert on US national debt. He led the team, the trade team was our most recent recruit."

U.S. medium-term treasury bonds, that is, 10-year treasury bonds, the target is medium-term treasury bonds with an amount of US$100,000 or an integer multiple thereof, and the remaining maturity from the first day of the delivery month is between 6.5 and 10 years, and the conversion factor is 6% per annum At this time, the general government bond interest rate in the market is around 5%.

   That is, a 10-year treasury bond with a target amount of $100 and a discount rate of 6% with a delivery period of 10 years, its current price should be between $106 and $107. Because the national debt will pay a total of 160 US dollars when it matures, and the discount rate is higher than the yield generally accepted by the market, so the price is also higher than the face price.

  This rate of return is a quotation formed by the market after comprehensive consideration of factors such as future interest rates and inflation, which also represents the market's expectations for future long-term interest rates. When the rate of return rises, for example, from 5% to 6%, the corresponding bond price will become about 100 US dollars. If the rate of return is higher, reaching 7%, the price of the bond will drop to about 94 US dollars. .

The estimates of these prices are based on the purchase and delivery of treasury bonds with a time limit of 10 years. If the period between the two is shortened, the corresponding price fluctuations will also become smaller. The price is trending towards $160. Because as the time shortens, the yields of these government bonds are no different from short-term interest rates, and there is basically no possibility of profit.

  For hedge funds that like high-risk returns, it is impossible to invest in government bond entities. The 6% return is just a drizzle for them, and the government bond futures market with a corresponding 40-fold leverage is the main body of their investment.

Take the ten-year treasury bonds for purchase and delivery as an example, the change in the yield of 0.25 makes the price of the treasury bonds fluctuate at about 1.5 US dollars. According to the leverage of 100 times, it only takes 1 US dollars, then when the yield in the market changes by 0.25%, the yield reaches US$1.5, which is a full 150% yield. If you do it in the wrong direction, it means that your position will be liquidated in an instant.

  However, one advantage of the national bond market is that the fluctuation range of this yield is very small, so the leverage can be set so high, otherwise not many people would dare to play. After all, this thing is linked to interest rates. A country’s interest rate policy adjustment needs to consider many factors. Usually, corresponding expectations will be formed in the market before the adjustment, so that interest rate futures, especially treasury bond futures, can respond within a corresponding period of time.

The leverage of the long-term treasury bond contract that Zhong Shi can get is 40 times, which means that he spends about 2,500 US dollars on each contract. Louis made a simple estimate and said with some concern: "If you only make a single month's contract, the The leverage is too high, should you consider reducing your position?"

   "Yes!" Zhong Shi said decisively, "But we must set the position at 80%, and use the rest as additional margin. This is the first battle of our Tianyu Fund, and we must fight it well!"

   "What about the direction?" Louis asked.

   "Short!"

  …

  There is no spot month for ten-year long-term treasury bonds, and the contract lengths are three, six, nine, twelve and other months. Naturally, Zhongshi's funds were all invested in the March contracts of March, April, and May, but this time it is impossible to use one account and brokerage firm, and the position division system must be strictly implemented, otherwise just The newly established Tianyu Fund is about to be targeted by the regulatory authorities.

Zhong Shi knew that if he wanted to put all of it into one contract, it would be too huge. The interest rate futures market is one of the largest financial markets, and if a billion dollars of capital were thrown into it, it would probably be a little bit of a splash. There are really too many giant crocodiles, and the number is astonishingly terrifying. As far as he knows, several of the most famous hedge funds have established huge positions in this market. In addition to the US market, they also established shockingly large positions in Europe, Canada and other places.

  Because they are linked to the bond market, commercial banks that occupy an absolute share in the bond market have to appear in this risky market. They largely maintain their profits in the bond market through hedging. In any case, almost all the richest institutions have a leg in this market.

"Get into the market as soon as possible, we don't have much time left!" Zhong Shi was thinking that due to the Fed's interest rate hike, the price of the bond market has also adjusted accordingly. The yield of long-term treasury bonds has risen from 5% to 5.02%. The Treasury bond price dropped from $106.6 to $106.5, and the Treasury bond futures market showed 106/16 (because the minimum price fluctuation of the U.S. bond quotation is 1/32, which is equivalent to 106.5), that is to say, the market has already responded to the Fed’s increase. The message reacted.

But at this time, there are two different views on the futures of treasury bond futures. It is absolutely necessary and may continue to raise interest rates in the future.

Zhong Shi no longer cared about these messy analysis and comments. When the brokerage firm that opened the account sent the analysis report, he just glanced at it and threw it aside. In fact, it is neither The Federal Reserve is not the inflation that may form in the future, but the shadow banking, and the mechanism formed in it is not understood by many people.

The rest is basically left to Liao Xiaohua and this Louis. I believe they can build up enough positions in the treasury bond futures market as soon as possible. market, stock index futures market.

According to economic theory, the capital market and the interest rate market are two markets that compete with each other, because an increase in interest rates will increase the possibility of capital flow to savings, and at the same time cause the cost of financing for enterprises in the capital market to increase. It is bad news for the capital market, that is, bad news. Similarly, if the interest rate falls, it means that the cost of obtaining funds will decrease, which is conducive to financing and expanding reproduction, etc., which is naturally good for listed companies.

The S&P 500 futures market is the S&P 500 index multiplied by 250 US dollars as the underlying amount. On the day the Fed announced an interest rate hike, the S&P 500 index plummeted 10.90 points, a drop of 2.27%, which also made it once rise to 482.85, the highest in history. The index of points dropped to the position of 470. But this is not over yet, the Fed may continue to announce interest rate hikes in the future, and the stock market will still be severely tested.

The 1 billion US dollars that stayed in the accounts of a series of Skyline companies finally found a good way out. Zhong Shi planned to use 200 million US dollars to short the S&P 500 index futures, and at the same time invest the other 800 million US dollars in the treasury bond futures market. The market will be the highlight of the year, and this fund will also require the cooperation of the trader team, which is why Zhongshi traveled thousands of miles and did not hesitate to spend hundreds of thousands of dollars to bring them to Chicago instead of ten miles away. Hong Kong with a few hours time difference.

   Now, there is only one fuse.

PS: There is no way to study the historical data of U.S. bond futures. After all, these bonds have expired. In addition, the discount rate of some 10-year U.S. Treasury bonds found is 6%, and some are 4%. The minimum unit of change is Some are 1/64, and some are 1/32. Here, the discount rate is 6%, and the minimum unit of change is 1/32. The calculation formula is that the delivery period is 10 years, and the principal and interest are paid in one lump sum. Don’t forget about it, everyone. I calculated the price according to this formula. The yield refers to the yield of U.S. debt over the years, which should be said to be relatively real. Everyone, for the sake of my hard work, please count your votes, any vote will do. Finally, a special thanks to book friends Demon Dragon Warrior and Zebra Center for their monthly support! At the same time, I would like to thank the magic dragon and war ghost for making me think about the reward!

  

  

  (end of this chapter)