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Future CTD Scenario Analysis | Weekly Release 7/15/22


Added Curve scenario to calculate the net basis along with a second set of PCA scenarios

There have been two new sets of scenarios added to the Future CTD. One of them is the “Custom Curve”, the second is a second set of PCA scenarios including the Parallel, Slope, and combination of both.

Custom Curve:

In the custom curve scenario analysis, traders will be able to enter how many basis points to bump the bond with the shortest maturity in the basket and the number of basis points to bump the bond with the longest maturity. Any bond with a maturity in between these will be bumped by the basis points interpolated from that custom curve.

In the example above, the TY1 has bonds in the delivery basket from April 2029(shortest maturity) to Aug 2032(longest maturity). The April 2029 bonds are being bumped by 100 basis points, while the August 2032 bonds are being bumped 300 basis points. All the bonds in between are being bumped by the basis points depending on the how close they are to each of the maturities.

PCA Scenario:

As for the PCA scenario, a second set of the “PCA1 Slope”, “PCA1 Parallel”, and “PCA1 Combo” has been added as “PCA2 Slope”, “PCA2 Parallel”, and “PCA2 Combo”. These are independent to each other as any different scenarios can be made. The underlying data, however, is the same for both scenarios. Traders can choose between the using the CMT or Swap curve data for the PCA scenarios.

Still looking at the TY1, under the PCA1 set of columns we have bumped the slope and parallel by 3 standard deviations. While the PCA2 set of columns the slope and parallel have been bumped by -3 standard deviations. The “Parallel1 HBasis” and the “PCA1 HBasis” have different results showing the April 2029 as the CTD, while the “Parallel 2 HBasis” and the “PCA2 HBasis” show the May 2029 as the CTD. Both scenarios are using the “CMT” curve type.


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