Forecasting U.S Treasury Futures' Calendar Spread During The Roll Period

November 15, 2018 - In QB research article, Gholizadeh & Narayanan [2018], we conducted a descriptive study of the U.S. Treasury calendar spreads around the roll periods. We showed that the change in calendar spread in the weeks prior to the roll period was mildly mean reverting during the ten days of the rolls. In this article we first describe additional variables to forecast the ten days of the roll period; these are based on the Commitment of Traders(COT) reports and the implied ratio (statistical ratio) of the near vs. far prices of the outrights measured during the weeks prior to the start of the roll. Next we outline our multivariate model to combine the predictors to forecast the ten days of the roll period.Each of these predictors is very weak on its own (low𝑅2), but the combination of the three is reasonably strong.

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