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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, CME Group introduced an enhanced 3-Year Treasury Note futures contract.

Jump to: Why Now | Vendor Codes | Block Market Makers | Synthetic Price History

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:

  • 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.

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.

Synthetic Price History Methodology

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