Every cash note or bond that is eligible for delivery into a Treasury futures contract has a conversion factor that reflects its coupon and remaining time to maturity as of a specific delivery month. A conversion factor is the approximate decimal price at which $1 par of a security would trade if it had a 6% yield-to-maturity.
The tables in this spreadsheet provide conversion factors for making cash to futures or futures to cash price conversions. These factors are used to compute the amount that a holder of a short (seller) position will invoice a long (buyer) when delivery occurs on a Treasury futures contract. The factor for a given bond or note is multiplied by the futures settlement price and added to the accrued interest on the bond or note to give the invoice amount. The factors also are used to compute the price at which a given bond or note will yield 6 percent.
Additional Information
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.
