Bond futures contracts for the 10-year Treasury slipped 0

Bond futures contracts for the 10-year Treasury slipped 0.4% after stronger-than-expected retail sales data. This move reflects reduced expectations for near-term economic slowdown, but hedging activity in Eurodollar futures remains consistent. "Once you get in there, you can build a war chest, and then you just sit on it, and you use it to scare people away that want to run against you into the future," Cates said. A conversion factor is also involved. It is a mechanism designed to normalize the pricing of bonds in a basket with various coupons and durations by assigning scale factors to each bond (see CME methodology on conversion factors). While conversion factors affect basis trade hedge ratios and introduce algebraic complexity in basis calculations, they are not central to our discussion. For the purposes of our discussion here, readers unfamiliar with Treasury futures will likely benefit from assigning all conversion factors a value of one. Traders in bond futures contracts are watching the June Fed meeting closely, as CME FedWatch indicates a 62% probability of a 25bps cut. The steepening in the long end of the yield curve suggests anticipation of stronger growth in H