Replicating Swap Spreads with Futures

Margin Savings, Transparency Among Benefits

With the recent introduction of CME Group's Deliverable Swap Futures, market participants can now express views on swap spreads by combining two futures products – a DSF combined with a Treasury future – instead of combining an over-the-counter spot‐starting IRS and a Treasury security.

Benefits of these Futures Swap Spreads include counterparty credit risk mitigation, greater capital efficiencies, standardization and transparency, CME Group analyst James Boudreault wrote in a report.

Both legs of the spread are backed by CME clearing, "enabling potentially significant margin savings due to immediate risk offsets given for holding a long and short position in a pair of CME Group interest rate futures."

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Disclaimer: This information was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.