What Is the ZB in Trading?
Simply put, the ZB, also known as the ‘T-bond,’ is a long-term, 30-year U.S. Treasury bond. The U.S. Treasury usually borrows money by issuing bonds and notes for a fixed term, such as 2-, 5-, 10-, and 30-year terms at a fixed interest rate.
Traditionally, these bonds were determined by the prevailing market rates at the time of the issuance of the bond. The ZB offers a different trading perspective compared to other indices. It is usually sensitive to major economic reports, and specific changes typically result in fluctuations in trading.
Bond prices are directly affected when interest rates fluctuate, which can affect the equity, forex, and commodities markets. The relationship between interest rates and bond prices is inverse. When rates or yields rise, bond prices fall.
Bonds consist of: face value (payout value), interest rate (coupon), and a maturity date. Should the interest rates increase, that means people are less willing to invest in a fixed-rate bond, and so its prices automatically go down.
Why Should You Invest in ZB Invest Investment Funds?
As discussed, the T-bond or ZB is a particularly attractive investment option because it offers the possibility for an investor to spread his risk over a long time. It is a highly liquid, standardized, and transparent investment tool.
Liquidity is one of its most attractive prospects. Because there are always many willing buyers and sellers, you can commit or free up your investment fund as need dictates. It is essential that you understand the specs of a ZB to understand just how it trades in the market.
According to the CME, ZB specs include:
- Face value: USD 100,000
- Point value: full point = $1,000
- Deliverable maturities: 25-30 years
- Margin requirements: $2,500 initial and $2,350 for maintenance
- Minimum Tick value= $31.25
- Contract months: Quarterly-March, June, September, and December
- Trading hours: electronic 5.00 PM (previous day) to 4.00 PM Central Time
- Last day of trading and delivery: last day of trading is the day before the last seven (7) days of the contract month. Delivery is physical and can be done on any day of the contract month.
One of the advantages of investing in ZB is that bond prices can fluctuate significantly, allowing the traders to earn significant profits. At the onset, traders only have to put up a small percentage of the total futures contract’s value. ZB also allows traders to speculate on a bond’s price movement for a future settlement date.
What Are Bond Futures?
Two parties agree that one party will purchase a specific asset at an agreed-upon price on a predetermined date in the future. On the day of the contract conclusion, the seller is obligated to deliver the agreed-upon asset to the buyer. This asset can be a commodity or a financial instrument such as a bond.
A bond futures contract is bought and sold through a brokerage firm that is licensed to trade in the futures market. Bond futures are contracts in which the underpinned asset is a Treasury bond. Treasury bonds are sold daily in a highly standardized futures market. Bond futures prices experience constant fluctuations because of their high trade turn volumes.
Bond futures can be used either as a speculative investment or for hedging. Hedging is the practice of purchasing products that can offer protection to holdings. It is a form of cushioning for the investor from market volatility. Speculation is investing in products that have a high-risk, high-reward profile. It is important to consult an investment advisor before engaging in speculative investments.
Are Investment Funds Safe?
All investments inherently carry a form of risk. However, some risks are easier to mitigate. Consider when you buy individual stocks from a single company, you alone bear the risk or reward factor for that investment. Should the company go bust, you shoulder the loss by yourself. Should it succeed, the profit reward is also solely yours to enjoy.
Now consider pooling your money into a fund alongside other like-minded investors. You will diversify your stock portfolio and spread your risk. You also have the benefit of having a fund manager whose sole goal is to keep making money for his clients and guaranteed dividends.
It is relatively safer to put your money in an investment fund as opposed to solo investments. We highly recommend that long-term investors build solid investment portfolios.
How Can Targets Trading Pro Help?
It is vital to consider several factors to maximize your returns when trading the 30-year U.S. Treasury bond. Some of these factors are:
- Interest rates
- Inflationary prospects
- U.S. dollar prices
- U.S. monetary and fiscal policy
Trading futures becomes a challenge because of the on-the-spot decisions you will have to make and other challenges you encounter while doing the actual trading. That is where Targets Trading Pro comes in.
Targets Trading Pro is an automated trading robot program that assesses entry prices and executes them based on trends. It also determines optimal stops and targets and places those values in your trade structure. Click here to start your one-week trial!