8 Consider the following market data, with price for UK gilts and the LIFFE long gilt contract. Gilts pay semi-annual coupon on an act/act basis.

Conversion factor UKT 5.75% 7 Dec 2009 £102.732 8 0.914 225 5 UKT 6.25% 25 Nov 2010 107.8777 0.944 931 2 UKT 9% 6 Aug 2012 134.455 1 1.161 955 8 Futures price 112.98 Settlement date 16 March 2000 Futures expiry 30 June 2000 Actual repo rate 6.24%

Using this data, calculate the gross basis, the net basis and the implied repo rate for each bond.

Which bond is the cheapest-to-deliver? Relative to the futures contract, what is the difference in price between the cheapest-to-deliver bond and the most expensive-to-deliver bond? What does a negative net basis indicate?