Five Against Bond Spread - FAB

A team-up movie where five of James Bond’s most famous enemies get together to defeat him.

Also, it’s a trading strategy meant to take advantage of fluctuating interest rates. To set up the position, you would take a futures position in a 5-year Treasury (either long or short) and then take the opposite stance in a long-term Treasury (either a 15-year or 30-year version).

The name “five against” comes from the fact that you’re setting a position on a 5-year duration against an opposite position on a longer-term duration. The strategy seeks to take advantage of perceived mis-pricings in the treasury market. The trader is looking to make money on fluctuations in the yield curve (the difference between the yields in short-term and long-term bonds).