Trading Treasury future spreads

Chapter 7 examines the tools and strategies available for trading yield curve spreads using U.S. Treasury futures. The chapter starts by explaining the importance and structure of the Treasury yield curve, highlighting key concepts such as curve level, slope, and curvature, as well as their economic implications. It details major trading strategies, including steepeners, flatteners, and butterflies and demonstrates how these approaches express views on macroeconomic conditions and policy expectations. The chapter discusses the use of inter-commodity spreads, or ICSs, to match DV01 and efficiently execute curve trades electronically, improving precision and capital efficiency. Calendar spreads are also covered, illustrating how traders can express short-term views through contracts on different expiration months. Real-world use cases and practical margin calculations are provided throughout, reinforcing the chapter’s focus on robust and adaptive risk management.