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bunds, bobl, shatz vs. US treasuries
Could someone explain this to me: The US treasury FUTURES market - two year notes futures trade at a higher price than the five year futures which also trades higher than the 10 year futures which also trades higher than the 30 year futureshowever. The German Futures markets - the 2 year (shatz) futures trade at a lower price than the 5 year (bobl) futures which trade lower than the 10 year (bund) futures. THANK YOU VERY MUCH IN ADVANCE!
bunds, bobl, shatz vs. US treasuries
The prices don't mean much, because the reference bonds have different coupons. The contracts are set up with bonds near par, and sometimes readjusted if they get too far away. So the upward slope in Germany suggests that rates have gone down since the contracts terms were last adjusted, while the downward slope in the US suggests the opposite. I say "suggests" because the contracts are not all reset at the same time, and there are complexities such as delivery adjustments and yield curve shape.