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U.S. treasuries are, by far, the largest and most liquid market in the world. In 2020, U.S. treasuries traded over $600 billion in value per day, well above the $450 billion traded in the U.S. stock market.  This number is independent of the enormous notional amounts that trade in futures and other interest rates derivative products. The point is that the reach of the treasury market is massive. 

Now, combine this fact with one of the most significant shifts we’ve seen in the trading world over the last two years: the growing involvement of the retail trader/investor who is taking a much larger role in managing their own finances and investments. Treasuries are a natural fit for the trader looking for choice in their trading approach.

Up until this point most treasury products were geared toward institutional use. New Micro Treasury futures will open the door for the retail trader and add flexibility for this growing group. 


Launched officially Sunday night, August 15, these contracts will have maturities of 2, 5, 10 and 30 years and will be priced in yield terms as opposed to normal treasury futures which trade inversely to yield. Each contract will have a tic value of $10 per basis point. For comparison, one basis point move today in the CME 10-Year treasury “big contract” is approximately $83.

Why is it important for the retail trader to be plugged into the treasury market? Here are a few key reasons:

Money moves to the deepest, most liquid market

For decades sophisticated market participants have looked to treasuries as the best and fastest interpreter of rapidly breaking macroeconomic data. It stands to reason that money will reflexively move toward the deepest and most liquid market at the first sign of a change in the economic landscape.  The bigger the headline, the greater the need for market liquidity and depth. Consequently, the treasury market is viewed as the leader of market moves while other markets and asset prices tend to follow. 

More ways to complement trading strategies

The introduction of treasury futures at a smaller size will open up varied opportunities for pairs trades and risk hedges to complement current common trading strategies.  Risk assets, like equities, have a complex relationship with rates. Sharp, short-term moves lower in interest rates tend to scare risk assets like stocks if the belief is that some unseen economic stress is causing money to seek safety quickly. Over time though, low interest rates that are slowly grinding lower tend to favor stock prices on a relative yield and potential growth basis. 

Foreign currency fluctuations will happen

Foreign currency price fluctuations are also heavily influenced by interest rates. When U.S. rates are high relative to foreign rates, global money tends to buy U.S. dollars and, in turn, use them to invest in treasuries. Higher rates also tend to be indicative of a healthy economy and usually coincide with increased foreign investments. These foreign investors also need to buy dollars to take advantage of strong U.S. businesses, real estate, etc. 

Gold has a close relationship with rates

Gold and precious metals are also not insulated from movements in rates. In moments of high economic distress money has historically moved to gold, U.S. dollars and U.S. treasuries. This effect is magnified in the metals market due to a declining disincentive to hold gold relative to treasuries. In simpler terms, gold’s yield, which of course is zero, looks better when U.S. rates are low. Conversely, in periods of higher rates, holding gold becomes relatively more expensive and tends to weigh on its price. 

For someone who’s been involved in rate trading for 35 years, it’s probably no surprise that I view most assets from a rate-centric lens.  All assets that are denominated in dollars have some relationship to U.S. rates. Going forward Micro Treasury futures could provide a valuable window for the retail world that was previously only open to institutions.




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All examples are hypothetical interpretations of situations and are used for explanation purposes only. The views expressed in OpenMarkets articles reflect solely those of their respective authors and not necessarily those of CME Group or its affiliated institutions. OpenMarkets and the information herein should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.. In the United Kingdom, BrokerTec Europe Limited is authorised and regulated by the Financial Conduct Authority. CME Amsterdam B.V. is regulated in the Netherlands by the Dutch Authority for the Financial Markets (AFM) (www.AFM.nl). CME Investment Firm B.V. is also incorporated in the Netherlands and regulated by the Dutch Authority for the Financial Markets (AFM), as well as the Central Bank of the Netherlands (DNB).

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