CME 10-Year Swap Rate

Product Snapshot: CME 10-Year Swap Rate Futures
The CME 10-Year Swap Rate futures contract is designed to hedge longer maturity cash market interest rate swaps. It also offers attractive spreading opportunities against the highly liquid Eurodollar futures and options contracts. Interest rate swaps are an innovative and useful means of transferring financial risk and are one of the largest financial markets in the world. The interest rate swap yield curve serves as a benchmark for interest rates in the U.S. due to the market’s size and liquidity

CMe 10-Year Swap Rate futures provide a way to:

• Profit from a long-term directional view on interest rate swaps
• Construct hedges for individual U.S. dollar interest rate swaps or corporate debt with minimal basis risk
• Lengthen or shorten the duration of interest rate swap by selling or purchasing Swap Rate futures
• Create intra-product yield curve spreads via trades between the Eurodollar Packs and Bundles and Swap Rate futures
• Take advantage of yield curve and other arbitrage opportunities with cash market instruments by executing an “Exchange Basis Facility” (EBF) transaction with Swap Rate futures

Things to know:

• Before Swap Rate futures, most dealers hedged their positions by using strips of Eurodollar futures or Eurodollar Packs and Bundles.
  • A strong correlation exists between the interest rate swap yield curve and Eurodollar strip.
  • Thus, the presence of the Eurodollar strip with its 10-years of quarterly contracts provides a unique companion product to Swap Rate futures contract.
• Traded exclusively on the CME Globex platform
  • Available virtually round the clock, around the world
  • Complete price transparency and anonymity

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