Can someone please tell me how to calculate this spread and what the implications are? Thanks in advance.

That is fly, methinks, not a spread...

2 * YIELD(current 5s) - YIELD(current 2s) - YIELD(current 30s) is what I normally do, so I get something like -43bps here.

And what does this spread really measure, I understand the 2yr/ 10yr spread but am having trouble grasping this "butterfly" spread?

You can think of it as a measure of convexity (aka humpi-ness) of the UST curve. Whether you care about that sorta thing is another matter altogether...

it measures the richness or cheapness of the middle maturity. in this case the 5yr. i calculate it as the (30yr-5yr)-(5yr-2yr). todays settles 4.49, 2.51, .96 put the fly at 43bps. by tracking that number you can follow how the 5yr is performing. lets say tomorrow that fly jumps to 50bps. that means 5yr rates dropped by more than 30 and 2s (5s outperformed). say you want to bet on the fly going out to 50 tomorrow. you would sell 2s, buy 5s and sell 30s. the weighting of the trade is tricky and someone else will have to pick that up. you wouldn't do the same face value for all three legs because of the different durations.

I asked Interactive brokers if this was possible to make a : Long 1 ZT, Short 2 ZF and Long 1 ZB combined instrument.
Apparently it's not possible to create such a combo.
I wondered how you managed to trade the spread.
I'm used to do calendar spreads mostly on commodities, it would be a great feature to be able to trade the butterfly as easily as a calendar spread is.
Sorry if it derails to the initial topic, but I'm sure people here can give me some advices on more operational things. If it's not possible I'll submit a poll to be able to do it, if that makes sense.
thanks in advance

edit : reading previous post I realize that I didnt take into account duration of the different futures, but the idea even with very fifferent weight stays the same, how you create a combo with different instruments ?

I've only ever heard of that fly traded in the cash market...I personally have never traded it (only spreads) because its a little trickier with the DV01 weights and its expensive (3 tickets to put on, 3 to unwind).

Howdy-

Newbie to the forum =)

For the 2/5/30 fly, vol-trader had it right to calculate the yield.

If you're doing futures, you can eliminate legging risk (possibly commish) and take advantage of margin requirements offered by the CME. Look up Intercommodity Spreads on CME Group's site, under their Interest Rates section. They also list the appropriate ratios for doing bond curve spreads (i.e. 2/30 was 6:1 last time i checked..)

As far as implementing this fly in futs, you would have to leg each in, although i imagine depending on which way you want to express the fly view, you could do a 2/5 IC spread, then figure out the ratio for the remaining leg 5/30 and execute manually, but the ratios are key. I haven't tested the idea yet (as I've only done fly's such as this in cash), but you want to make sure to get the ratios right. I'll do some more work either tonight or this weekend when I have a bit more time.

-mrp