Credit futures from CME Group have emerged as a powerful and capital-efficient tool for institutional investors, offering a new way to manage credit risk and express market views with precision. These exchange-traded derivative contracts are designed to provide market participants with direct exposure to the credit risk of the U.S. corporate bond market. This guide explores our Bloomberg Credit futures, their key trading and risk concepts, and how they compare to other instruments in the credit landscape.
A growing market
Since launching in June 2024, our Credit futures have grown substantially, with open interest surpassing $900 million in notional value leading into the Sep 2025 expiry.
What are Credit futures?
CME Group Credit futures are exchange-traded contracts that are cash-settled to market-leading Bloomberg corporate bond indices. The product suite is constructed to provide practitioners with distinct forms of credit exposure, based on the underlying index they track, including:
- Investment Grade (IQB) and High Yield (HYB) futures: These are total return contracts that provide exposure to both interest rate and credit risk. They reference the Bloomberg U.S. Corporate Investment Grade Index (LUACTRUU Index) and the Bloomberg U.S. Corporate High Yield Very Liquid Index (LHVLTRUU Index).
- Duration Hedged Investment Grade (DHB) and Duration Hedged High Yield (DHY) futures: These contracts track indices with an embedded duration hedge, constructed by taking short positions in U.S. Treasury futures to effectively isolate the credit-only exposure. The DV01 for these contracts is by construction close to zero, meaning their value is largely insensitive to changes in the Treasury curve. They reference the Bloomberg U.S. Corporate Duration Hedged Total Return Index Value Unhedged (I30287US Index) and the Bloomberg U.S. High Yield Very Liquid Duration Hedged Total Return Index Value Unhedged (I39131US Index).
The contracts are based on Bloomberg indices, which are widely used benchmarks, ensuring they track a measure of the market that is already integral to the portfolios and performance benchmarks of many institutional investors.
The approximate U.S. Treasury futures weightings used in the underlying duration-hedged indices can be found in the Duration-Hedged Indices tab of the Credit Futures Analytics tool. These weightings are rebalanced monthly along with the rest of the index.
Applications for Credit futures
Credit futures offer versatile applications for a variety of market participants.
- Gaining market exposure: Futures provide a way to gain efficient, unfunded and leveraged exposure to the corporate bond market. Participants can quickly and effectively implement tactical overlays or enter and exit short-term positions without needing to buy or sell the underlying physical bonds. This makes them a useful "liquidity sleeve" for smoother cash management.
- Hedging credit and interest rate risk: Futures contracts can be used to manage both credit and interest rate risks of corporate bonds. The total return contracts (IQB and HYB) allow for broad hedging of both risks, while the duration-hedged contracts (DHB and DHY) are a more precise tool for isolating and managing only the credit component. For example, a portfolio manager can use DHB contracts to hedge their exposure to investment-grade credit spreads without affecting their interest rate risk.
- Relative value trading: Credit futures facilitate relative value strategies against other instruments, such as Credit Default Swap indices (CDX), corporate bond ETFs or even against individual bond mispricings. The transparency of the futures market allows for more efficient arbitrage and spread trading.
Risk analytics including OAS, duration, DV01 and CR01 can be found on the Bloomberg terminal FAIR function or in the Credit Futures Analytics tool.
Unique value propositions
Credit futures stand out from other credit market instruments due to several key advantages, offering a superior blend of efficiency, flexibility and liquidity:
- Liquidity: Our Credit futures concentrate liquidity on a central limit order book (CLOB), promoting a transparent and efficient market. Blocks and derived blocks (for trades of 50 contracts or more) allow market participants to manage large orders effectively and lean on liquidity in adjacent markets. Basis Trade at Index Close (BTIC) transactions can also be executed to manage risk around the index close.
- Flexibility: The availability of both Total Return contracts (IQB and HYB) and Duration-Hedged contracts (DHB and DHY) allow for broad hedging of both credit and interest rate risk as well as targeted hedging of credit risk.
- Capital efficiency: Margin offsets against other CME Group-cleared products, including U.S. Treasury futures and Equity Index futures, make Credit futures a highly attractive tool for sophisticated investors.
- Credit futures vs. CDX indices: Credit futures closely track the broad-based corporate bond indices, as compared to CDX, which is designed to be equally weighted among a smaller set of issuers (100 for HY and 125 for IG), does not include financial issuers such as banks, and is rebalanced semi-annually rather than monthly.
- Credit futures vs. ETFs: ETFs are fully funded securities, whereas Credit futures are unfunded instruments, requiring only a fraction of the contract’s notional value (initial margin). While ETFs can be purchased on margin, the typical 50% margin requirement is significantly higher than that for Credit futures, which range from approximately 1% to 2%. As a result, futures offer greater leverage and capital efficiency. Additionally, obtaining a short position in an ETF can be costly and carry recall risk, whereas futures allow for short positions by simply selling a contract.
Quantifying CLOB liquidity
CLOB liquidity is usually quantified by the bid/ask spread and book depth available at the best price level (the “top-of-book”). The table below shows various measures of the average bid/ask spread and depth (calculated as an average of bid and ask depth) for the month of August. Bid/ask spread is also presented in terms of bps and as a percentage of futures price to compare with liquidity in adjacent markets.
| Contract | B/A Spread (Index Pts) | B/A Spread (% of Price) | B/A Spread (bps) | Depth (Contracts) |
Depth (Notional $MM) |
|---|---|---|---|---|---|
| IQB | 0.6 | 0.017% | 0.25 | 20 | $2.1 |
| HYB | 0.13 | 0.018% | 0.63 | 17 | $1.9 |
| DHB | 0.06 | 0.028% | 0.41 | 29 | $3.1 |
| DHY | 0.04 | 0.031% | 1.06 | 55 | $5.8 |
* Top-of-book average over all trading days in Sep 2025, between 10am - 3pm CT.
In addition to the table above that shows averages, the table below shows the percentage of time that bid/ask spreads were at certain levels or better.
| Contract | B/A Spread (Index Pts) | B/A Spread (% of Price) | B/A Spread (bps) |
% of Time at B/A Spread or Better |
|---|---|---|---|---|
| IQB | 0.5 | 0.01% | 0.21 | 73.1% |
| 1 | 0.03% | 0.41 | 99.5% | |
| 1.5 | 0.04% | 0.62 | 99.9% | |
| HYB | 0.1 | 0.01% | 0.48 | 70.9% |
| 0.2 | 0.03% | 0.97 | 99.40% | |
| 0.3 | 0.04% | 1.45 | 99.9% |
* Top-of-book average over all trading days in Sep 2025, between 10am - 3pm CT.
How derived blocks are priced
A derived block enables execution of a large futures position by sourcing liquidity from a related market. For Credit futures, the trade price and quantity are derived from a related hedging transaction in cash market instruments, such as fixed income ETFs.
The key advantages of a derived block are:
- Enhanced liquidity: Linking to the broader credit market unlocks deeper liquidity.
- Built-in hedge: Helps reduce risk for the liquidity provider and contributes to a tighter market.
- Flexible hedging: Can choose the hedging instrument (provided a reasonable degree of price correlation exists) and method from the most liquid related markets.
The following example shows how derived block prices are determined. Suppose that participants agree on a futures reference of 3470 against LQD reference of 100. Participants also agree on a hedge ratio of 0.81 = 6.8 / 8.4, reflecting the duration difference between IQB futures (6.8 years) and LQD (8.4 years).
Participants agree on a hedging method and window for the reference hedge: a TWAP from 11:00 a.m. - 12:00 p.m. ET.
A liquidity provider conducts their hedging transactions in the related market and determines the TWAP to be 101.
Because the TWAP is 1% higher than the reference price, the futures price will be adjusted by that amount, multiplied by the agreed hedge ratio.
Result:
FuturesRef x [1+ [(TWAP/Ref -1) x AdjustmentFactor]
= 3470 x [1+ (101/100 - 1) x 0.81]
= 3470 x 1.0081
= 3,498.11 (rounded to the nearest 0.01 Index Points)
Conclusion
- FAQ: Credit Futures – Answers to our clients’ most frequently asked questions.
- Credit Futures Analytics – Web-based analytics tool that includes key risk metrics, charts, historical tracking error and more.
Historical tracking error between Credit futures and underlying indices can be found in the Charts and Tracking Error tab of the Credit Futures Analytics tool.
Credit Futures
Precisely manage credit exposure using the efficiency and liquidity of futures markets.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
