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Re-Introducing 3-Year Treasury Note futures

Re-engineered for today's Treasury market

In response to client demand for an additional tenor point on the short-end of the curve, and to better serve the evolving needs of today’s treasury environment, we will launch an enhanced 3-Year Treasury Note futures contract on July 13, 2020 (pending regulatory review).

What’s changing

Reduced tick size to 1/8 of 1/32 for outrights and spreads (from 1/4 of 1/32).

  • Builds upon the success of the 2-Year Note futures (ZT) tick cut in January 2019 which improved cost-to-trade by up to 32% and attracted more end user participation.
  • Brings greater alignment between 2s and 3s for seamless spread trading.

New matching algorithm of 100% FIFO for outrights (from 40% FIFO/60% Pro-Rata). Calendar spreads will remain 20% FIFO/80% Pro-Rata.

A more robust deliverable basket through the addition of aging 7-year notes with remaining term to maturity that ranges from 2 years, 9 months to 3 years.

  • Will increase the size of the delivery basket from roughly 8 issues/$288B to 12 issues/$400B, bringing the 3-Year contract in line with 2-Year and 5-Year Note futures.

Renewed focus on liquidity, in collaboration with top Treasury futures market makers.

3-Year Note futures deliverable grade with original 7s – sample basket for Jun20 contract

Original Maturity

Coupon

Issue
Date

Maturity
Date

CUSIP

Adjusted
Issuance
(Billions)

Jun. 2020

3.0

 1/2

03/16/20

03/15/23

912828ZD5

$38

3 yr

7.0

1 1/2

03/31/16

03/31/23

912828Q29

$28

7 yr

5.0

2 1/2

04/02/18

03/31/23

9128284D9

$35

3 yr

3.0

 1/4

04/15/20

04/15/23

912828ZH6

$40

3 yr

7.0

1 5/8

05/02/16

04/30/23

912828R28

$28

7 yr

5.0

2 3/4

04/30/18

04/30/23

9128284L1

$35

3 yr

3.0

 1/8

05/15/20

05/15/23

912828ZP8

$42

3 yr

7.0

1 5/8

05/31/16

05/31/23

912828R69

$28

7 yr

5.0

2 3/4

05/31/18

05/31/23

9128284S6

$36

3 yr

3.0

1/8*

06/15/20

06/15/23

912828ZU7

$44

3 yr

7.0

1 3/8

06/30/16

06/30/23

912828S35

$28

7 yr

5.0

2 5/8

07/02/18

06/30/23

9128284U1

$36

3 yr

* Based on Treasury guidance

Deliverable basket summary for Jun20 contract - current and future

 

Total

(Billions)

CUSIPs

Current

$306

8

+Original 7s

$112

4

New 3-Year Note total

$418

12

2-Year Note future

$408

11

5-Year Note future

$438

10

Why now

Much has changed since 3-Year Note futures were originally launched in 2009:

  • Treasury futures account for a much larger share of the daily risk transfer in Treasury markets having seen exponential growth in the institutional user base, trading volumes and open interest.
  • Investors have demonstrated a strong appetite for additional tenor points on the UST futures curve as evidenced by the success of the Ultra T-Bond (Launched 2010) and Ultra 10-Year Note futures (launched 2016).
  • Spread trading between Treasury futures has become more efficient with the rise of CME Globex-listed Inter-Commodity Spreads (ICS).

Treasury futures profile

Today

(2019)

Then

(2009)

% Change

Average daily volume (contracts)

4.4M

1.6M

+181%

Average daily open interest (contracts)

14.8M

3.5M

+326%

Avg # of large open interest holders

1,511

672

+125%

Number of Liquid UST futures contracts

6

4

+50%

Yield curve spreading via Inter-Commodity Spreads

23K spreads/day (129K legs/day)

0

 

Record 3-year issuance is driving a greater need for risk management:

  • June’s 3-year note auction was the latest ever at $44B. 
  • 3-year auctions are expected to increase by $2B/month through year-end.
  • When paired with the addition of aging 7-year notes, the 3-Year’s deliverable basket could increase to $500B for the Mar2021 contract.

Get updates on 3-Year T-Note futures

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