TYPES OF BOND FUTURES CONTRACTS
There are many interest rate based products that can be traded through various exchanges, but here we are going to highlight the major ones.
U.S Treasuries
The Treasury market transacts the debt of the U.S Government. The size of the market roughly corresponds to the outstanding U.S federal debt, the majority of which consists of marketable securities:
- Notes (T-notes) – Debt security maturing in 1 to 10 years, trade as 2yr, 5yr, and 10yr.
- Bonds (T-bonds) – Debt security maturing in 10 years+
The above products are traded through the CBOT exchange in Chicago. The above products are all quoted in U.S Dollars. T-Notes and T-bonds are quoted on a percentage of par with fractions of a percent in 32nds, for example 104.28=104+28/32=104.875. All products trade in quarterly cycles with the months of rollover being March (H), June (M), September (U), and December (Z).
German Debt Securities
The German Government Debt products are heavily traded within the screen trading community, The secondary market for these Federal securities is one of the largest and most liquid markets for Government bonds in the world, and it is the prime reason that Eurex is the biggest futures exchange in the world. The following products are in their portfolio:
- Euro-Schatz – Debt security maturing in 2 years
- Euro-Bobl – Debt security maturing in 5 years
- Euro-Bund – Debt security maturing in 10 years
- Euro-Buxl – Debt security maturing in 30 years
The above products are all quoted in Euros, and like U.S treasuries they have quarterly contracts that roll over in the months of March (H), June (M), September (U), December (Z).
U.K Debt Securities
Gilt-edged securities, known as Gilts are UK Government securities issued by HM Treasury. Since April 1998 gilts have been issued by the UK Debt Management Office, an executive agency of HM Treasury. The DMO took over responsibility for gilt issuance from the Bank of England, following the transfer of responsibility for setting interest rates from HM Treasury to the Bank of England in May 1997. Gilts are traded on the LIFFE exchange in the Sterling currency and with the expiring months of March (H), June (M), September (U), and December (Z).