Government bonds curves
In other words, we call the bond curves with different maturity as term structure of interest rate. Here shows the US treasury bonds’ term structure as of 14 Mar 2023.
The term structure of interest rate reveals the relationship between spot rate and maturity, at a given time.
China sovereign bonds and CDB rate curve
Rate trading strategies
- Steepen/Flatten rate
- E.g. Sell 50Y and Buy 10Y, if 50Y yield will relatively rise higher than 10Y yield. (10x50)
- This strategy assumes that the curve will remain a fundamental upward status, while the slope of different maturities change
- Roll down (carry)
- Find the steepest spot on the rate curve, buy and hold for earning carry.
- The uneven slop means that the return of holding a bond with different maturities can vary.
- The uneven shape comes due to various reasons, offering demand and supply, liquidity etc.
Some other curves
- USD OIS curve
- An overnight indexed swap (OIS) is an interest rate swap (IRS) over some given term, e.g. 10Y, where the periodic fixed payments are tied to a given fixed rate while the periodic floating payments are tied to a floating rate calculated from a daily compounded overnight rate over the floating coupon period.
SOFR swap rate is a swap where a counterparty pays a fixed-rate on an annual, Act/360 basis and receives SOFR, reset daily and paid annually on an Act/360 basis.
