3-YEAR T-NOTE - OVERVIEW
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, CME Group introduced an enhanced 3-Year Treasury Note futures contract on July 13, 2020.
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Contract Unit
Face value at maturity of $200,000
MINIMUM PRICE FLUCTUATION
One-eighth (1/8) of one thirty-second (1/32) of a point (1/256.) = $7.8125 ($2000 x 0.00390625)
Product Code
CME Globex: Z3N
CME ClearPort: 3YR
Clearing: 3YR
Trading Hours
Sunday - Friday: 5:00 p.m. - 4:00 p.m. CT
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As the leading source of liquidity on the Secured Overnight Financing Rate (SOFR), CME SOFR futures are increasingly relied upon for managing exposure to short-term funding markets. SOFR futures trade alongside Eurodollars and Fed Funds to offer seamless spread trading and margin offsets of up to 70%.
Contract enhancements
- Reduced tick size to 1/8 of 1/32 for outrights and spreads (from 1/4 of 1/32), offering efficient cost-to-trade and 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. This increases the size of the delivery basket from roughly 8 issues/$288B to 12 issues/$400B, and brings the 3-Year basket 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).
Record 3-year issuance is driving a greater need for risk management:
- The 3-year note has seen back-to-back record auctions with $44B and $46B in June and July respectively.
- 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.
| 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 |
Vendor Codes
| OUTRIGHTS | 2Y V. 3Y | 3Y V. 5Y | 3Y V. 10Y | 3Y V. ULTRA 10Y | 3Y V. T-BOND | 3Y V. ULTRA BOND | |
|---|---|---|---|---|---|---|---|
| CME Globex | Z3N | TYT | TOF | TUN | TYX | TOB | TOU |
| CME ClearPort / Clearing | 3YR | ||||||
| Bloomberg | 3Y | ||||||
| CQG | Z3N | TYT | TOF | TUN | GTYX | TOB | TOU |
| DTN | @3N | @TYT | @TOF | @TUN | @TYX | @TOB | @TOU |
| Fidessa | Z3N | TYT | TOF | TUN | TYX | TOB | TOU |
| FIS Global | Z3N | TYT | TOF | TUN | TYX | TOB | TOU |
| ION (Pats, FFastFill) | Z3N | TYT | TOF | TUN | TYX | TOB | TOU |
| Itiviti (Orc, Tbricks) | Z3N | TYT | TOF | TUN | TYX | TOB | TOU |
| Refinitiv Globex RIC Root | 1Y | 1TYT-1TYT | 1TOF-1TOF | 1TUN-1TUN | 1TYX-1TYX | 1TOB-1TOB | 1TOU-1TOU |
| Refinitiv Composite RIC Root | YR | ||||||
| TT | Z3N | ZT|Z3N | Z3N|ZF | Z3N|ZN | Z3N|TN | Z3N|ZB | Z3N|UB |
| Vela | Z3N | TYT | TOF | TUN | TYX | TOB | TOU |
Block Market Makers
| FIRM NAME | CONTACT(S) | PHONE NUMBER | HOURS |
|---|---|---|---|
| Credit Suisse | Tom Morreale | +1 212 325 3337 | RTH |
| Avery Geehr | +1 212 325 3337 | RTH | |
| Deutsche Bank | John Carpinello | +1 212 250 2860 | RTH |
| Ambrish Shah | +1 212 250 2860 | RTH | |
| DRW | Joe Meissner | +1 312 542 1090 | RTH |
| Goldman Sachs | Jerry Strabley | +1 212 902 5010 | RTH |
| James Groth | James Groth | +1 773 307 2566 | All Hours |
| JP Morgan Securities LLC | Peter Isola | +1 212 834 4652 | RTH |
| Morgan Stanley | Joe Anderson | +1 212 761 3464 | RTH |
| Nomura | John Gorman | Office: +44 20 710 30174 | ETH |
| Mobile: +44 7444 250448 |
Synthetic Price History
Based on settlements for the Cheapest to Deliver cash Treasury note, with repo financing, this theoretical price series can serve to level set a new trading point on the futures curve.
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