Dec

1

Alex Castaldo writes: 

Last Friday was the day to roll long positions in ZB futures: to sell

the December futures (which are nearing expiration) and buy the March futures instead. I noticed something a little puzzling. For the last 2 years the far away (new contract) future was cheaper than the nearby one (the old  contract). But last Friday it was the opposite:

> 2PriceDate old contr new contr  oc price     nc price     roll cost

> 05/30/2018   ZBM8      ZBU8     145 14/32    144 19/32    - 27/32

> 08/30/2018   ZBU8      ZBZ8     144 31/32    144  7/32    - 24/32

> 11/29/2018   ZBZ8      ZBH9     140  4/32    139 16/32    - 20/32

> 02/28/2019   ZBH9      ZBM9     145  4/32    144 15/32    - 21/32

> 05/30/2019   ZBM9      ZBU9     153  2/32    152 14/32    - 20/32

> 08/29/2019   ZBU9      ZBZ9     166  2/32    165  8/32    - 26/32

> 11/27/2019   ZBZ9      ZBH0     160  3/32    159 10/32    - 25/32

> 02/27/2020   ZBH0      ZBM0     168 16/32    167 15/32    -1  1/32

> 05/28/2020   ZBM0      ZBU0     178 21/32    177  2/32    -1 19/32

> 08/28/2020   ZBU0      ZBZ0     176 14/32    174 25/32    -1 21/32

> 11/27/2020   ZBZ0      ZBH1     173 28/32    175  1/32    +1  5/32

As long as short term interest rates (repo rates) are positive, it would seem that an object delivered 3 months further away should be cheaper than the same object delivered 3 months sooner. (The good old Time Value of Money). Which makes me think that the Cheapest to Deliver for ZB March 2021 must be different from the CTD for ZB December 2020 if the March is priced higher? But I am not sure if this explanation is correct. And I find it disturbing that even though I traded tbonds for a while I do not fully understand some of the basic mechanics. Do you have any insight? Why did the price difference (technically know as the Roll Cost) flip like this?

George Zachar  writes: 

On Bloomberg, pull up USZ0 and USH1 CMTY DLV.

The cheapest to delivers did change:

Z0 = 4.5% '36

H1 = 5.0% '37


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