CME Group Ultra T-Bond

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The Ultra T-Bond 25-Year contract is a Treasury complex contract that was introduced at CME Group on Jan. 11, 2009. The contract was touted by the exchange as a more direct way to manage long-term interest rate risk than already existing contracts.[1]

The deliverable basket for Ultra T-Bond futures comprises cash Treasury bonds with at least 25 years of remaining term to maturity. By comparison, deliverable securities for the existing T-Bond contract are bonds with remaining terms to maturity of 15 years or more.[2]

CME launched Ultra 10-Year U.S. Treasury note futures and options in the first quarter of 2016. The Ultra 10-Year U.S. Treasury Note futures allow for delivery of original issue 10-year U.S. Treasury notes with remaining terms to maturity at delivery of at least 9 years 5 months and not more than 10 years. [3]

The 10-Year Treasury notes have remaining terms to maturity between 9-Yrs 5Mos and 10-Yrs (on-the run, old, and double old 10-year Treasury Notes). The notes provide a close proxy for cash 10-year Treasury note exposure, while maintaining the classic deliverable basket structure of CBOT treasury futures with the three most recent original issue 10-year Treasury notes eligible for delivery.

Ultra T-Bond futures can be spread against "classic" T-bond futures to isolate the long end of the yield curve. T-Bond futures can also be combined with 30-Year Interest Rate Swap futures to create a synthetic 30-Year Swap spread. They can also be incorporated into liability driven investment strategies.[4]

In all other respects, the specifications for the Ultra T-Bond futures resemble those for the existing CME Group Treasury Bond contract. They are identical in terms of their notional value, minimum tick size, contract critical dates, and notional coupon.[5]

CME Group began offering options on the Ultra T-Bond futures on June 7, 2010.[6]

Resources



Ultra T-Bond futures
Exchange CME Group
Settlement Physically delivered
Pricing Unit Minimum Price Increment One thirty-second of one point ($31.25 per contract), except for intermonth spreads for which the minimum price increment would be one quarter of one thirty-second of one point ($7.8125 per contract)
Tick Value Need tick value!
Contract Months Three consecutive expiries in the March, June, September, and December quarterly cycle.
Last Trading Day Last Trading Day The seventh business day before the last business day of the delivery month. Trading in an expiring contract ceases at 12:01 p.m. on the last trading day.
  Open Outcry Electronic
Trading Hours 7:20 a.m. – 2:00 p.m. Central Time (CT), Monday – Friday 5:30 p.m. – 4:00 p.m., CT, Sunday – Friday
Ticker Symbol UL UB
Price Limits N/A N/A

Notes

The delivery method for the product is through the Federal Reserve book-entry wire-transfer system.

References

  1. CME Launches Ultra T-Bond. Medill Reports.
  2. CME Group To Launch Long-Term U.S. Tsy Bond Futures - The "Ultra" T-Bond Jan. 10, 2010. John Lothian News Interest Rates Blog.
  3. CME Group Announces Launch of Ultra 10-Year U.S. Treasury Note Futures and Options. CME Group.
  4. Barclays Considers, Is Ultra Long Ultra Good?. John Lothian News Interest Rates Blog.
  5. Ultra T-Bond - Contract Design. CME Group.
  6. Long-Term U.S. Treasury Bond Futures. CME Group.