CBOT Treasury Futures: Calendar Spreads

Calendar spreads involve buying a futures contract of one delivery month and simultaneously selling a futures contract of a different delivery month. This whitepaper discusses U.S. Treasury futures calendar spreads and the benefits of this strategy in facilitating the “Quarterly Roll”—rolling Treasury futures positions from one quarterly delivery month into the next.

Utilizing CBOT Treasury Calendar Spread markets to maintain open interest offers many advantages. To maintain a long position in Treasury futures, one could sell the calendar spread, which simultaneously sells the nearby delivery month (to offset the existing long position to zero) and buys the deferred delivery month (re-establishing the long exposure), all in one transaction. To maintain a short position, one could buy the calendar spread, which will accomplish the opposite. The deeply liquidity of Treasury futures allow participants to execute this strategy with relative ease.