Bond Duration / Convexity

A detailed examination of how Tom Baldwin interpreted order flow in the chaotic T-bond pit, deciphering the actions of other traders to gain a important edge.

A look at empirical duration, a method of calculating duration based on historical price and yield data rather than a theoretical formula. This article discusses the pros and cons of this approach and when it is most useful.

An advanced look at bond convexity, explaining how traders can structure portfolios to benefit from interest rate volatility. This article covers positive and negative convexity and strategies to maximize this valuable portfolio attribute.

An in-depth exploration of how traders use interest rate futures and swaps to hedge the duration of a bond portfolio. This article provides the formulas and practical steps for calculating the number of contracts needed.

An advanced discussion of the risks associated with callable bonds, particularly the concept of negative convexity. This article explains how to analyze the price behavior of callable bonds and the meaning of option-adjusted spread (OAS).

The disparity between Solana's and Ethereum's staking yields presents an arbitrage opportunity. This article provides a cross-chain analysis of SOL and ETH rewards, considering the risks and complexities involved.

A detailed guide to maximizing roll returns in energy futures like WTI and Brent crude by analyzing term structure depth, liquidity points, and geopolitical impacts on backwardation.

A comparative study of the nuances of roll yield capture in grain futures (corn, wheat) versus soft commodities (coffee, sugar), highlighting differences in seasonality and storage costs.

## The SOFR-Swap Spread: A Barometer of Market Health The interest rate swap spread is a classic, bellwether indicator of conditions in the fixed income markets. With the transition to the Secured Overnight Financing Rate (SOFR), this key spread has taken on a new form: the SOFR-swap spread.

## The Fed Watcher's Spread: SOFR vs. Fed Funds Futures For traders focused on U.

Real yields, the return on an investment after accounting for inflation, are a important barometer of an economy's health and a key driver of asset prices across financial markets....

Uncover the hidden yield in REIT preferred stocks. This guide explains the mechanics of preferreds, their benefits of high yield and low volatility, and provides trading strategies based on yield-to-call, stripped yield, and credit spreads.

For pension funds, insurance companies, and other institutional investors with long-term, inflation-linked liabilities, the challenge of matching assets to liabilities is a formidable one....

Interest rates' impact on REITs is complex. This playbook explains the dual impact of capital costs and yield appeal, how to differentiate REITs by sensitivity, and provides actionable trading strategies for both rising and falling rate environments.

Treasury Inflation-Protected Securities (TIPS) are not merely a buy-and-hold instrument for retail investors looking to preserve capital against inflation. For the professional trader, the TIPS market offers a rich environment for expressing sophisticated views on inflation, real interest rates, and the interplay between them....

For institutional investors and hedge funds seeking to express a view on inflation, the choice between Treasury Inflation-Protected Securities (TIPS) and inflation-linked swaps is a important one....

## Understanding Roll Yield Beyond the Basics Roll yield is one of the most important, yet frequently misunderstood, sources of return in futures-based commodity exchange-traded funds (ETFs). While many traders grasp the basic concept—that positive returns can be generated when a futures market is in backwardation (downward-sloping curve) and negative returns...

Event-driven high-yield trading capitalizes on price inefficiencies created by corporate actions such as mergers, acquisitions, and spin-offs. By rigorously analyzing deal terms, regulatory risks, and market sentiment, traders can construct tactical positions that extract outsized returns within compressed timeframes.

Trading distressed high-yield bonds requires a meticulous approach that looks beyond nominal coupon yields to total return opportunities shaped by restructuring prospects, recovery valuation, and tactical credit spread management. This article dissects actionable strategies for identifying and trading underpriced securities by quantifying expected recovery rates, timing workouts, and integrating capital structure arbitrage techniques.

Sector rotation strategies in high-yield bond trading revolve around reallocating exposures across industries with varying default risk, liquidity, and yield dynamics to optimize risk-adjusted returns. This article examines quantitative and qualitative metrics to time sector shifts, manage position sizing, and exploit yield curve and credit spread differentials to enhance portfolio performance in high-yield markets.

This article presents a quantitative strategy for trading high-yield credit spreads by exploiting relative value discrepancies in bond and CDS markets. It outlines precise models for spread selection, statistical arbitrage methods, and risk-adjusted trade management techniques to optimize entry and exit points.

Liquidity directly impacts execution quality, risk assessment, and position management in high-yield bond trading. This guide presents practical techniques to quantify and incorporate liquidity metrics in trade decisions, providing actionable tools for experienced high-yield traders to optimize entry and exit strategies while managing volatility and market impact.

Recovery value analysis is essential for traders managing distressed debt or equities facing Chapter 11 bankruptcy proceedings. This guide outlines a pragmatic approach to estimating payout values using detailed claims hierarchy, asset valuation, and scenario modeling to optimize trading decisions in post-bankruptcy restructurings.

Distressed debt swaps provide traders a complex, tactical way to convert defaulted bonds into equity, aiming to extract value from distressed capital structures. This article rigorously analyzes the mechanics, pricing, and strategic execution of distressed debt swaps, offering practical frameworks and real-world calculations traders can apply to optimize such trades.

Callable and putable high-yield bonds incorporate embedded options that significantly impact their pricing and trading strategies. This article focuses on the quantification and exploitation of these embedded options through effective modeling, risk management, and tactical trading approaches for professional traders.

An expert-level guide to funding rate arbitrage, covering everything from the basics to advanced strategies.

A professional approach to target selection involves a deep analysis of the factors that sustain a high yield and contribute to potential capital appreciation, ensuring the carry profits are not given back through a falling exchange rate.

## The Illusion of a Single Spread: Why Traditional OAS Fails for Risky MBS For years, the Option-Adjusted Spread (OAS) has been the go-to metric for valuing mortgage-backed securities (MBS). It provides a convenient way to compare the relative value of different MBS by providing a single spread that accounts for the prepayment option embedded in the mortgages.

The high-yield bond market, often referred to as the junk bond market, operates with a distinct microstructure that sets it apart from its investment-grade counterpart. Characterized by lower liquidity, higher credit risk, and a more diverse investor base, the high-yield market presents unique challenges and opportunities for traders.

Explore advanced strategies for generating alpha from fallen angel bonds, focusing on post-downgrade market dynamics and identifying long-term value.