On January 10, CME Group, a major security and commodity exchange company, announced that it will launch futures on 20-year US Treasury bonds on March 7. The 20-year bond future will help investors better manage their US treasury curve exposure. According to CME Group, the 20-year US treasury bond futures will provide increased precision and efficiency in managing exposure at the 20-year maturity point on the Treasury curve. The bond future will assist in boosting demand for maturity by providing investors with an easier way to hedge the debt or to speculate on its future    yield  moves.

Agha Mirza, the Global Head of Rates and OTC Products for CME Group, said: “The introduction of a futures contract on the U.S. Treasury’s 20-Year bond responds directly to the market need for a hedging tool at a time when managing US Treasury market risk is more important than ever.”

“Since the US Treasury began issuing 20-Year bonds in May 2020, total issuance has been over $450 billion, creating customer demand for a new product that establishes 20-year yield exposure. As a result, the design of this new contract represents extensive feedback from a wide set of clients and the broader fixed-income trading community,” Mirza elaborated.

The new futures will complement CME Group’s existing variety of liquid US Treasury futures and options, which saw a growth of more than 15% year-over-year last year to a record 4.5 million average daily volume.

Once launched, the new futures will get automatic margin offsets against interest rate futures, and will be listed based on the rules of the Chicago board of trade (CBOT). Shortly after the launch, such contracts will become eligible for portfolio margining against other cleared interest rate swaps and futures.

Why Trading of Treasury Bond Futures Contracts Rise

The development by CME Group comes at a time when an increasing number of investors consider that trading US treasury bond futures makes sense just like any other ordinary investment. The returns of such futures rival those of    equities  but with smaller drawbacks. Last month, the trading volumes of US 10-year Treasury futures surged significantly. Despite the highest inflation rates since the 1980s, investor demand for long term-bonds is strong and such a pattern is drawing attention. Industry analysis shows that the profits obtained from pension funds and stock investments are used to purchase government bonds.

Last year, the CME Group launched Micro Treasury Yield futures, a simplified futures contract that tracks yield. The launch was part of the company’s effort to attract its customers, who are typically investment professionals, to capitalize on the boom in retail investing. The Micro Treasury Yield futures rise when Treasury yields increase and fall when they decline. Such new investment products arrive as debts as the US balloons and interest rates remain low. In October last year, the US budget deficit hit $2.8 trillion for 2021. At the same time, the average daily volume in CME’s US Treasury futures and options have increased 30% year-over-year, which the company said is an indication of increased hedging and trading activity.

On January 10, CME Group, a major security and commodity exchange company, announced that it will launch futures on 20-year US Treasury bonds on March 7. The 20-year bond future will help investors better manage their US treasury curve exposure. According to CME Group, the 20-year US treasury bond futures will provide increased precision and efficiency in managing exposure at the 20-year maturity point on the Treasury curve. The bond future will assist in boosting demand for maturity by providing investors with an easier way to hedge the debt or to speculate on its future    yield  moves.

Agha Mirza, the Global Head of Rates and OTC Products for CME Group, said: “The introduction of a futures contract on the U.S. Treasury’s 20-Year bond responds directly to the market need for a hedging tool at a time when managing US Treasury market risk is more important than ever.”

“Since the US Treasury began issuing 20-Year bonds in May 2020, total issuance has been over $450 billion, creating customer demand for a new product that establishes 20-year yield exposure. As a result, the design of this new contract represents extensive feedback from a wide set of clients and the broader fixed-income trading community,” Mirza elaborated.

The new futures will complement CME Group’s existing variety of liquid US Treasury futures and options, which saw a growth of more than 15% year-over-year last year to a record 4.5 million average daily volume.

Once launched, the new futures will get automatic margin offsets against interest rate futures, and will be listed based on the rules of the Chicago board of trade (CBOT). Shortly after the launch, such contracts will become eligible for portfolio margining against other cleared interest rate swaps and futures.

Why Trading of Treasury Bond Futures Contracts Rise

The development by CME Group comes at a time when an increasing number of investors consider that trading US treasury bond futures makes sense just like any other ordinary investment. The returns of such futures rival those of    equities  but with smaller drawbacks. Last month, the trading volumes of US 10-year Treasury futures surged significantly. Despite the highest inflation rates since the 1980s, investor demand for long term-bonds is strong and such a pattern is drawing attention. Industry analysis shows that the profits obtained from pension funds and stock investments are used to purchase government bonds.

Last year, the CME Group launched Micro Treasury Yield futures, a simplified futures contract that tracks yield. The launch was part of the company’s effort to attract its customers, who are typically investment professionals, to capitalize on the boom in retail investing. The Micro Treasury Yield futures rise when Treasury yields increase and fall when they decline. Such new investment products arrive as debts as the US balloons and interest rates remain low. In October last year, the US budget deficit hit $2.8 trillion for 2021. At the same time, the average daily volume in CME’s US Treasury futures and options have increased 30% year-over-year, which the company said is an indication of increased hedging and trading activity.