CME Group is to launch Ultra 10-Year US Treasury Note futures and options for early in the first quarter of 2016. The new contracts will be listed with, and subject to, the rules and regulations of the CBOT, pending certification of contract terms and conditions with the CFTC and completion of all applicable regulatory review periods.
The new Ultra 10-Year US Treasury Note futures will allow for delivery of original issue 10-year US Treasury notes with remaining terms to maturity at delivery of at least 9 years 5 months and not more than 10 years. By comparison, the existing 10-Year US Treasury Note futures (6 ½ to 10-Year), allows for delivery of 7-Year and 10-Year US Treasury Notes with remaining terms to maturity at delivery of at least 6 years 6 months and not more than 10 years. The existing contract will remain unchanged.
"CME Group worked diligently with the trading community and conducted an extensive market validation process of three potential contract designs since July 2015," says Agha Mirza, CME Group Global Head of Interest Rate Products. "The chosen design, based on customer feedback, more precisely reflects exposure of 10-year US Treasury notes, the benchmark for US Treasury securities, and best serves the risk management needs of the marketplace."
Due to the US Treasury Department's suspension of 30-year bond issuance between 2001 and 2006, the gap in the exposures of the existing 10-Year US Treasury Note and the US Treasury Bond futures has expanded from approximately 8 years to about 14 years, creating customer demand for a new product that establishes 10-year yield exposure.
The Ultra 10-Year US Treasury Note futures and options contracts will receive automatic margin offsets against existing interest rate futures upon launch, and will become eligible for Portfolio Margining of CME Cleared Interest Rate Swaps and Futures shortly after launch.
Initially, CME Group will list three March-quarterly delivery months, beginning with the March 2016 expiry. Other than the delivery basket, the specifications for the Ultra 10-Year US Treasury Note futures and options contracts closely resemble those for the existing 10-Year US Treasury Note futures and options contracts. They are identical in terms of their notional value, minimum tick size, contract critical dates, and conversion factor yield.