Category: Money tips Release Date: 2006-10-14
Forward transactions in the inter-bank bond market has been more than a month following, we are investing in their application were discussed. For simplicity, transaction costs and margin (vouchers) and other factors is negligible.
Lock costs or benefits
For some future time need to buy bonds, investors can be identified in the current transaction in the future by buying long-term bond prices, thereby locking the cost of buying to avoid the risk of price fluctuation. Who already hold a particular bond investors can also be identified by forward transactions to sell at some time in the future price of bonds, thereby locking investment income, to avoid the risk of future price fluctuations.
In addition, the use of forward transactions may also carry out long-term buy-back, locking in the future the cost of a particular time of repurchase or earnings.
Speculative operations
According to investors in the future direction of interest rate forecasts can be divided into long and short speculative speculative. If investors anticipate what the market interest rates will rise, a bond prices will fall only, may be the only long-term bonds sold to carry out short speculation. If the contract expires, the bond turned out lower than the spot price of the contract settlement price, investors can buy the bonds from the spot market for delivery, make a profit. On the contrary, the reverse operation. Of course, if forecast errors, is also a huge investment losses.
Should be pointed out that, before the expiration of the contract, if the market on the expiry date on the long-term pricing has emerged as investors anticipate the change, investors can also do the same amount of value date of the reverse operation, lock return on investment, without having to wait until the contract expires on the day of re-hedging operations.
Combined with the outright repo arbitrage
In theory, forward transactions, bond prices should be equal to the spot price plus the cost of capital transactions during the period (interpreted as buy-back interest), such as the forward price is above or below the spot price and the repurchase of interest and, appeared set profit opportunities, concrete can be divided into long and short arbitrage arbitrage. If the forward price is higher than the spot price and the repurchase of, and interest, you can buy and use Outright Outright buy-back financing to enlarge the same time, selling long-term, for long arbitrage; the contrary, the opposite. But neither of these are relatively limited spatial arbitrage opportunities may arise soon after the smoothing.
For example: 6 30, 010505 bond yield to maturity of 3.248 percent, when the 1-month repurchase rate 1.182%, in January of repurchase interest rate: 101.08 × 1.182% ÷ 12 = 0.10 yuan, while long-term theory of the full price of the transaction as follows: 101.08 +0.10 = 101.18 yuan, the corresponding yield to maturity of 3.276%.
Assuming 1:1-month forward bid higher than the theoretical price of 101.50 yuan, the corresponding yield of 3.223 percent, you can do more to enlarge arbitrage. The concrete operation process: 1) June 30, an investor has to hold 10 million yuan face value tickets 010505, to which the certificate as collateral for a month to buy back into the fund, immediately according to the price of 101.08 yuan to buy the Coupon Spot 10 million yuan (that is, to enlarge 1 times); 2) Meanwhile, to make a one-month forward contract to sell, the price of 101.50 yuan; 3) expires July 30, it will zoom to buy 10 million RMB 505 Voucher price of 101.50 yuan by selling access to funds being returned to buy back the principal and interest, without prejudice to the original position of the circumstances, an additional income of 32,000 yuan arbitrage.
Assuming a 2:1-month forward prices lower than theoretical price, in order to 101.10 yuan, the corresponding yield of 3.289 percent, you can zoom to short arbitrage. The concrete operation process: 1) June 30, doing a one month's reverse repurchase melt out of 10.108 million yuan of funds received 10 million yuan treasury bonds 010505 tickets immediately in the market price of 101.08 yuan by selling the tickets, recovery of funds, amount of funds used to zero; 2) Meanwhile, for a one month forward purchase contracts, the price of 101.10 yuan; 3) July 30 forward transactions and reverse repurchase expired at the same time, then the Executive Yuan term contract, according to 101.10 yuan to buy treasury bonds, to pay 10.11 million yuan in cash will be returned to treasury bonds repurchase counterparty at the same time receive the repurchase counterparty to pay principal and interest 10.118 million yuan, in the off-income arbitrage funds obtained under 08000 yuan.
Intertemporal arbitrage
This is using the same bonds in different delivery months spread changes in arbitrage profits as a method of concrete can be divided into nearly empty and nearly empty far far more than two kinds of strategies.
Suppose in January a long-term bonds offer only 100 yuan in February quoted at 100.50 yuan long-term, investors can determine the current through the long-term deal in January after the 100 yuan to buy the bonds at the same time, and through the long-term transactions identified in February to 100.50 yuan after selling the bonds, locking the coming one month's investment income, of course, can also zoom in long-term buy-back sets, so it is nearly empty operation far. On the contrary, it is far more near-space operations.
Cross-species Arbitrage
Duration of the bond between the different species there is a reasonable rate of return gap, if the two bond yield spreads significantly deviate from the normal value, the market outlook could return to normal, then the profit opportunities arise. Investors at this time can yield long-term deal to buy the relatively high debt, while the relatively low yields to sell bonds. In the forward contract expires, as long as the two bonds, the yield gap between the return to normal, investors can, through high-yield bond prices rise, or low-yield bond prices fall in profitability. Of course, before the expiration of the contract, if the market quotes on the two long-term bonds, the yield gap has returned to normal, investors can, through forward transactions, the reverse operation of the same value date, lock income, without having to wait until the delivery on the day of re-hedging operations.
Cross-market arbitrage
And exchange inter-bank market, occasionally some Quanzhong spreads, but the cross-market arbitrage is 1-2 days to transfer trusteeship because of the time there is uncertainty. After the emergence of forward trading, investors can, through forward transactions locked 1-2 days after buying, selling price, eliminating the cross-market arbitrage risk transfer trusteeship.
In short, forward transactions for the bond market provides a wealth of hedging and profit channel, I believe as the market development and deepening of investment philosophy, this new thing will radiate vitality.
