International derivatives exchange Eurex’s Euro-BTP Futures product suite had a very successful start into 2011. The futures are based on notional long and short-term debt instruments issued by the Republic of Italy (Buoni del Tesoro Poliennali, or BTP).
The average daily volume (ADV) for the long-term Euro-BTP contract (FBTP) in January 2011 has grown about 25 per cent year-on-year (y-o-y), totalling 6,800 contracts. The ADV of the Short-term Euro-BTP futures was 2,400 in January and continues to rise. Both contracts also had daily record volumes due to Ireland’s credit downgrade, with the Euro-BTP future at 18,289 contracts on 2 February and the Short-term Euro BTP future at 6,829 contracts on 3 February 2011 (excluding daily volumes during roll period).
The open interest on the two contracts has also grown steadily. As of 17 February 2011 open interest on the FBTP is 30,175 compared to an open interest of nearly 20,000 in January 2010. This represents a growth rate of approximately 50 percent y-o-y. For the short-term BTP futures, open interest is 13,124 as of 17 February 2011.
The main users are Italian and Spanish customers as well as institutional clients (asset managers) who run European bond portfolios that are partially hedged with a mixture of German and Italian government bond futures.
Launched in September 2009, the long-term BTP future is part of Eurex’s benchmark interest rate derivatives segment and aims to offer an appropriate hedge for all non-triple A-rated European government bonds and potentially other interest rate bearing instruments (i.e. swaps). Furthermore, the futures add value to the Italian government bond market by enriching the basis and repo trading opportunities. In October 2010, Eurex introduced the short-term BTP contract to further complement its interest rate derivatives offering.