Explaining Treasury Yield and Bond Futures PnL Differences

Summary

The document presents a fixed-income futures position and asks why its realized price-based loss differs from a loss estimated using the change in the underlying Treasury note’s yield. The trader reports buying a US two-year note futures contract, later closing it, and identifying a Treasury security as the cheapest to deliver at the time. The futures prices imply a larger loss than an estimate based on the reported yield move and an average basis point value.

The example raises a practical risk-measurement question: a futures contract’s PnL does not necessarily match a simple yield-change estimate for one Treasury security. Relevant factors may include the futures contract’s conversion factor, changes in the cheapest-to-deliver bond, basis, and differences between closing and settlement observations, but the document itself provides no answer or analysis to establish which factor explains the gap. It is therefore a useful problem statement rather than a worked method, and the stated inputs alone are insufficient to diagnose the discrepancy.

Key ideas

• The document compares futures price PnL with a yield-change estimate based on a Treasury note.
• The futures position references a cheapest-to-deliver security, so the underlying exposure may not equal a simple note position.
• Conversion factors, basis changes, delivery options, and observation timing can affect comparisons of futures and yield-based PnL.
• The document poses the discrepancy but does not provide a worked explanation or resolution.

Tags

# Bond Futures: PnL Mismatch between underlying treasury yield delta and futures prices at close&open


# Bond Futures: PnL Mismatch between underlying treasury yield delta and futures prices at close&open












I've traded the "US 2YR NOTE (CBT) Jun23"- Future TUM3:

- On 15-03-2023 I bought 70 contracts at 103,67829.

- On 30-05-2023 I closed the position at 101,97266.

The CTD was back then: T 0 ¼ 06/30/25.

When I check the EOD yields for the treasury note I see:

- On 15-03-2023 a yield of: 3,93 %

- On 30-05-2023 a yield of: 4,62 %

So the yield went 68bp up between open and close.

Based on the traded future prices my PnL is ~ -239k USD. Based on the yield difference of 68bp my loss should be lower at ~ -184k (based on the total basis point value of average 2.700 USD)

Where does the difference come from?

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.