Study on future-spot arbitrage strategies in China's treasury bond ETF and treasury bond futures based on high-frequency data

Abstract

Arbitrage strategy is one of the basic trading strategies in the Treasury bond futures market. It makes futures price reflect the trend of spot market more reasonably. It can also help to increase flexibility of China's Treasury bond market. Still in the early stage, the Chinese Treasury bond futures market provides apparent arbitrage opportunities. However, in practical operation of basis arbitrage trading of Treasury bond futures, transactions in the Treasury bond spot market are not as frequent as expected, making it difficult to take actions when arbitrage opportunities arise. To solve this problem, instead of using Treasury bond spot, we use Treasury bond ETF (Exchange-Traded Fund) in our Treasury bond future-spot arbitrage strategy research. Our study illustrates the forward basis arbitrage opportunities on the basis of price trends and spreads expansion.