U.S. Treasury Bond Futures and Options
T-Bonds / T-Notes
The Cornerstone for Interest Rate Risk Management
U.S. Treasury bond and note futures have grown to become fundamental
risk management tools for investors worldwide.
In today's ever-changing global economy, holding fixed-income
securities is tantamount to speculating on the futures direction of interest rates. With
the Treasury futures contracts at the Chicago Board of Trade and the MidAmerica Commodity
Exchange, institutional and individual investors can help control the risk in holding
fixed-income securities and help optimize their performance.
Whether market predictions call for rising or falling rates, you'll
find that U.S. Treasury futures are an effective, low-cost way to help you meet your
unique objectives. Read on to learn how they can benefit you.
Meeting the Needs of a Changing Marketplace
Interest rate futures were pioneered by the CBOT in 1975 in response to
a growing market need for tools that could protect against sharp and frequent swings in
the cost of money.
U.S. Treasury bond futures were first introduced, followed by futures
on 10-year, 5-year, and 2-year U.S. Treasury notes. Over the past two decades, contract
volume has grown to unprecedented levels, reflecting the growth of the underlying
instruments and profound changes in the marketplace.
Today, CBOT Treasury futures are the most actively traded interest rate
contracts in the world. Here are a few key reasons why you should consider trading these
powerful risk management tools.
The CBOT offers futures on 2-year, 5-year, and 10-year U.S. Treasury
notes and 30-year U.S. treasury bonds. Whether you're seeking to manage short, medium, or
long-term risk, there is a contract that meets your needs.
Efficiency
The unparalleled liquidity of CBOT Treasury futures enables you to
enter and exit positions quickly and easily - and receive the best fills on your order.
Market Integrity
Counterparty credit risk is a major concern in today's marketplace.
Trading at the CBOT is structured to protect all parties involved from that risk. Our own
professional audit staff oversees the trading at the exchange. The Board of Trade Clearing
Corporation provides a performance guarantee. And the Commodity Futures Trading
Commission, whose primary function is to protect the integrity of the markets and its
participants, regulates all U.S. futures markets. With these safeguards, counterparty
credit risk is no longer an issue.
Pricing
The prices of Treasury futures contracts are determined by open outcry
in the designated trading pits, enabling you to receive the best prices available. These
prices are global interest rate barometers, reflecting moves in national and international
rates, and are available to the public immediately.
Trading Versatility
Because of CBOT Treasury bond and note futures respond to the same
economic forces that affect cash fixed-income securities, you can use them to help control
the risk of holding these securities as well as to improve returns.
How Treasury Futures Can Work for You
Regardless of your market outlook, U.S. Treasury bond and note futures
are the ideal tools to help you adjust the risk/return characteristics of your fixed
income securities. Here are some of the many risk-management opportunities they offer.
Lock in a Purchase Price
If you plan to purchase fixed-income securities in the futures and are
concerned about the possibility of higher prices, you can buy Treasury futures and secure
a maximum purchase price.
Preserve Investment Value
By selling Treasury futures, you can lock in an attractive selling
price and protect the value of a portfolio or individual security against possible
decreasing prices.
Cross-Hedge
U.S. Treasury bond and note futures can be used to control risk and
enhance the returns of non-U.S. government securities. Treasury futures can be effective
risk-management tools for corporate bonds, Eurobonds, and other fixed-income instruments.
Trade Changes in the Yield Curve
Because Treasury futures cover a wide spectrum of maturities from
short-term notes to long-term bonds, you can construct trades based on the differences in
interest rate movements all along the yield curve.
Contract Specifications
Trading Unit
T-bond Futures - One U.S. Treasury bond with $100,000 face value at maturity.
10-year T-note Futures - One U.S. Treasury note with $100,000 face value at
maturity.
5-year T-note Futures - One U.S. Treasury note with $100,000 face value at
maturity.
2-year T-note Futures - One U.S. Treasury note with $200,000 face value at
maturity.
Deliverable Grades
T-bond Futures - Bonds with at least 15 years remaining to maturity.
10-year T-note Futures - Notes with 61/2 to 10 years remaining to maturity.
5-year T-note Futures - Notes with 4 years 3 months to 5 years 3 months
remaining to maturity.
2-year T-note Futures - Notes with 1 year 9 months to 2 years remaining to
maturity.
Tick Size
T-bond Futures - 1/32
10-year T-note Futures - 1/32
5-year T-note Futures - 1/2 of 1/32
2-year T-note Futures - 1/4 of 1/32
Price Limit
T-bond Futures - 3 points, expandable to 41/2 points.
10-year T-note Futures - 3 points, expandable to 41/2 points.
5-year T-note Futures - 3 points, expandable to 41/2 points.
2-year T-note Futures - 1 point, expandable to 11/2 points.
Contract Months
T-bond Futures - March, June, September, December
10-year T-note Futures - March, June, September, December
5-year T-note Futures - March, June, September, December
2-year T-note Futures - March, June, September, December
Trading Hours
T-bond Futures - 7:20a.m. -2:00p.m., 2:30-4:30p.m.,
5:20p.m.-8:05p.m., 10:30p.m.-6:00a.m.
10-yearT-note Futures -7:20a.m. -2:00p.m., 2:30-4:30p.m.,
5:20p.m. -8:05p.m., 10:30p.m. -6:00a.m.
5-year T-note Futures - 7:20a.m. -2:00p.m., 2:30-4:30p.m.,
5:20p.m. -8:05p.m., 10:30p.m. -6:00a.m.
2-year T-note Futures -7:20a.m. -2:00p.m., 2:30-4:30p.m.,
5:20p.m. -8:05p.m., 10:30p.m. -6:00a.m.
Ticker Symbol
T-bond Futures - US
10-year T-note Futures - TY
5-year T-note Futures - FV
2-year T-note Futures - TU
Last Trading Day
T-bond Futures -Seventh business day preceding the last business
day of the delivery month.
10-year T-note Futures -Seventh business day preceding the last
business day of the delivery month
5-year T-note Futures -Seventh business day preceding the last
business day of the delivery month.
2-year T-note Futures -The earlier of (1) the second business
day prior to the issue day of the 2-year note auctioned in the current month, or (2) the
last business day of the calendar month.
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