MarketsMuse.com update provides insight for those who are focused on the global macro approach to a topic that many of the world’s leading hedge funds and professional investment managers are fixated on: fixed income. Below thoughts are courtesy of the 27 March a.m. edition of “Sight Beyond Sight”, the investment newsletter authored by Neil Azous and published by global macro think tank Rareview Macro LLC.
A few weeks ago we stated that fixed income will provide a greater opportunity to generate positive P&L this year and that we would look to increase our time spent on this asset class. In “fund speak” fixed income would be given a larger portion of the risk budget. In that spirit, we are adding two new strategies to the model portfolio today. Unlike the strategies we’ve outlined over the last few weeks, this is more volatility arbitrage than relative value trading. Specifically, we looked at two Different strategies .The first strategy focuses on 6-month options on Eurodollar futures contracts (symbols: EDU5, EDU8) that are six months and three years from expiration, respectively.
The second strategy focuses on the cross-regional volatility difference between German Bunds and US Treasuries (symbols: RXM5, TYM5). Both strategies were executed earlier this morning in the model portfolio. The updates were sent in real-time via Twitter (@rareviewmacro).
Trade #1: Eurodollar Calendar Ratio Spread
Trade #2: Bund-UST Volatility Arbitrage Continue reading