Subject:        	TYZ/TYH ROLL SHOULD NARROW/Roll longs now 
Date sent:      	Mon, 26 Nov 2001 15:24:12 +0000



Recommendation:
Roll long TYZs now at 39/32 or roll short TYZ
later in week 2 to 3/32 lower.

Rationale:
The TYZ/TYH roll will be impacted by a number of
factors. Most important, we believe, will be changes
in the contract's cheapest-to-deliver caused by market
movements. Changes in CTD will change the amount
of net positive carry that is the primary determinant of
the TYZ/TYH roll's value.

For example, The TYZ/TYH roll priced using the 6.5%
2/10 has 35.75/32 of net carry, while the roll priced with
the 4.7% 11/08 has only 28.5/32 of net carry.

|------------+--------+--------+--------|
|TYZ/TYH     |TYZ est.|Net     |Est.    |
|Cheapest-   |CTD     |positive|TYH/TYZ |
|to-Deliver  |switch  |carry   |roll    |
|            |price   |(32)    |(32)    |
|------------+--------+--------+--------|
|4.7 11/08   |  111-00|   23.50|    33.0|
|------------+--------+--------+--------|
|5.5   5/09  |  109-00|   28.50|    36.0|
|------------+--------+--------+--------|
|6.0   8/09  |  106-16|   32.25|    37.5|
|------------+--------+--------+--------|
|6.5   2/10  | current|   35.75|    39.0|
|------------+--------+--------+--------|
|5.7   8/10  |  103-16|   30.50|    37.5|
|------------+--------+--------+--------|


Assumes term repo for TYZ at 1.9% and 1.8% for TYH.
Switch prices are estimates and can vary greatly due
to changes in CTD yield spreads.


TYZ/TYH Option Value
In addition to changes in net carry, the spread will also be
impacted by changes in the contracts' net option value.
Implied volatility on TYH options rose 150 basis points
during the previous week. The net option value, (TYZ option
 value-TYH option value) is6.5/32. A 100 bps change
in TYH options' implied volatility should impact TYZ/TYH
roll by roughly 1.2/32


TYZ/TYH 60-day Spread History
Current        39/32
Average   33/32
High      39/32
Low       33+/32





Good Luck and Take Care

=======================================
Jon and Warren at the CBOT
312-987-5970 or 800-547-3587, 312-347-5061 =======================================
This report has been prepared for informational purposes only. It does not constitute an offer, recommendation or solicitation to buy or sell any securities. It is based on information generally available to the public from sources believed to be reliable. No representation is made that the information is accurate or complete or that any returns indicated will be achieved. Past performance is not indicative of future results. Price and availability are subject to change without notice. Additional information is available upon request. =======================================