i guess they are "popular" insofar as they are extremely liquid.... though this doesnt qualiify them as ideal for a trade structure.... i can say with certainty that the ebedded options in the contracts are mot at all worthy of dismissal..... wait till a market situation in which the CTD is changing dynamically, and you will see that the trade will have nothing to do with LIBOR credit spreads......

Good point, although by watching the implied repo/net basis, you can usually see potential for change of CTD. Perhaps the biggest threat to delivery at present is CTD squeezes, something that has always been present in markets but something that the hedge funds are now getting into - establishing a position and trying to persaude the repo desk to go special. Thete is currently an investigation in the US into this practice.I always feel more comfortable being long the spread (long t-notes), to avoid these possibilites and to also enjoy the asymmetical nature of the risk profile. (some say the credit spread is like implied vol) but avoiding being delivered by not holding in the final month.

Credit spreads and swap sprads have very little in common these days. The credit is risk in swaps is so small that it can almost be neglected. If you have a credit crisis today, you would see credit spreads wider and swap spreads tighter. Why?.. Because the flight to quality would be executed through receiving on swaps as much, if not more so, than through UST buying.This doesn't change the dynamic w.r.t. how to put on a spread widening trade, but in the first post credit and swaps spreads were described as two strategies for the same trade. They are not.. credit widening is a UST bullish trade, credit widening tradeswap sprd widening is a UST bearish trade, credit tightening trade

agreed - swaps are the now the weapon of choice when moving huge amounts of duration so the swap rate direction now dictates the spread direction..... the thing is that this is the case until it isn't (e.g. 1998)....if wachovia were to go out of biz i got a couple dollars saying you see a massive widening.... or even something like 9/11 when EVERY treasury security repoed at zero for over two weeks.... that gave the spreads quite a nudge..... let us not forget the past so soon..... but without mentioning these 10,000 year floods which seem to happen every 5y, if there were a significant deterioration in banks credit, i'd bet my checking acciunr spreads widen (why not - nothing to lose!)