NYSE Liffe, the Europe-based derivatives business of NYSE Euronext, is expanding its long gilt futures contract by launching two and five year gilt futures on 23 November.

NYSE Liffe’s long gilt futures contract already trades over two million lots each month on average.

The record levels of debt issuance by the UK government, combined with the unprecedented quantitative easing programme being carried out by the Bank of England, has led to considerable uncertainty about the nearer-term outlook for UK interest rates, stimulating demand for shorter-dated derivatives instruments to manage risk.

Paul MacGregor, director of NYSE Liffe fixed income, says: “Given current economic conditions, we decided to ask a range of customers – including gilt edged market makers, Sterling swaps desks, individual proprietary traders, hedge funds and asset managers – whether they wanted shorter-dated gilt contracts.  We found near universal demand, because there is a widespread feeling that, as far as future interest rates are concerned, we are entering uncharted waters.”

The new gilt futures contracts will be physically deliverable, trading on a six per cent coupon and a GBP100,000 notional value. The delivery baskets will be 1.5 to 3.25 years and four to six years for the two and five year contracts, respectively.