Managing Longer-Dated Treasury Yield Exposure
Ultra T-Bond futures and options are a natural complement to the U.S. Treasury futures complex, providing market participants with a more direct way to manage long-term interest rate risks and add duration to their portfolios.
The Ultra T-Bond futures contract is the fastest growing interest rate futures product ever introduced by the CME Group exchanges. Adding options to this robust futures market provides even more opportunities for market participants seeking longer-dated, off-balance sheet exposure in Treasury markets.
The key feature distinguishing the Ultra T-Bond from the existing T-Bond futures contract is the relatively narrow range of deliverable securities. The deliverable basket for Ultra T-Bond futures comprises cash Treasury bonds with at least 25 years of remaining term to maturity. By comparison, deliverable securities for the existing T-Bond contract are bonds with remaining terms to maturity of 15 years or more.
However, effective with the March 2011 expiry, the deliverable basket for the T-Bond contract will include bonds with remaining terms to maturity of at least 15 years, but less than 25 years.
In all other respects, the specifications for the Ultra T-Bond futures resemble those for the existing Treasury Bond contract. They are identical in terms of their notional value, minimum tick size, contract critical dates, and notional coupon.
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