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]

Ultra T-Bond Futures
Contract Unit Face value at maturity of $100,000
Price Quotation Points and fractions of points with par on the basis of 100 points
Trading Hours CME Globex: Sunday - Friday 5:00 p.m. - 4:00 p.m. CT with a 60-minute break each day beginning at 4:00 p.m.
CME ClearPort: Sunday 5:00 p.m. - Friday 5:45 p.m. CT with no reporting Monday - Thursday from 5:45 p.m. – 6:00 p.m. CT
Minimum Price Fluctuation One 32nd of one point ($31.25 per contract), except for intermonth spreads for which the minimum price increment is one quarter of one thirty-second of one point ($7.8125)
Product Code CME Globex: UB

CME ClearPort: UBE

Clearing: UBE

Listed Contracts The first three consecutive contracts in the March, June, September, and December quarterly cycle.
Settlement Method Deliverable
Termination of Trading Seventh business day preceding the last business day of the delivery month. Trading in expiring contracts closes at 12:01 p.m. on the last trading day.
Trade at Marker or Trade at Settlement Rules Trading at Settlement (TAS) is subject to the requirements of Rule 524.A. TAS trades off a ""Base Price"" of zero (equal to the daily settlement price) to create a differential versus the daily settlement price in the underlying futures contract month. The TAS clearing price equals the daily settlement price of the underlying futures contract month plus or minus the TAS transaction price.

TAS Table

Settlement Procedures Treasury Settlement Procedures
Position Limits CBOT Position Limits
Exchange Rulebook CBOT 40
Block Minimum Block Minimum Thresholds
Price Limit or Circuit Price Limits
All or None Minimum All or None Minimums
Vendor Codes Quote Vendor Symbols Listing
Last Delivery Date Last business day of the delivery month.
Grade and Quaity U.S. Treasury bonds that have remaining term to maturity of at least 15 years and less than 25 years from the first day of the futures delivery month.* The delivery invoice amount equals the futures settlement price times a conversion factor, plus accrued interest. The conversion factor is the price of the delivered bond ($1 par value) to yield 6 percent.
  • For more information, please refer to T-Bond Basket Gap Decision.
Ultra T-Bond Options
Contract Unit Face value at maturity of $100,000
Minimum Price Fluctuation Outrights: 1/64 of a point = $15.625, rounded up to the nearest cent.

CAB: $1.00 to $15.00 in $1.00 increments

Price Quotation Points and fractions of points with par on the basis of 100 points
Trading Hours CME Globex: SUN-FRI: 5:00 p.m. - 4:00 p.m. CT
Open Outcry: MON - FRI: 7:20 a.m. - 2:00 p.m. CT
CME ClearPort: Sunday 5:00 p.m. - Friday 5:45 p.m. CT with no reporting Monday - Thursday from 5:45 p.m. – 6:00 p.m. CT
Product Code CME Globex: OUB

CME ClearPort: UBE

Open Outcry: OUL

Clearing: UBE

Listed Contracts Monthly contracts listed for 3 serial months and quarterly contracts listed for 3 quarters
Termination of Trading Trading terminates on the Friday before 2nd last business day of the month prior to contract month
Position Limits CBOT Position Limits
Exchange Rulebook CBOT 40A
Block Minimum Block Minimum Thresholds
Price Limit or Circuit Price Limits
Vendor Codes Quote Vendor Symbols Listing
Strike Price Listing Procedures Strike prices will be listed in increments of one-half of one point for the nearest monthly (serial or quarterly) expiration. The minimum strike price range will include the at-the-money strike price closest to the current futures price plus the next forty (40) consecutive higher and the next forty (40) consecutive lower strike prices. For all other months, strike prices will be listed in increments of one point. The minimum strike price range will include the at-the-money strike price closest to the current futures price plus the next thirty (30) consecutive higher and the next thirty (30) consecutive lower strike prices.
Exercise Style American-style. The buyer of an option may exercise the option on any business day prior to expiration by giving notice to CME Clearing by 6:00 p.m. Options that expire in-the-money after the close on the last trading day are automatically exercised, unless specific instructions are given to CME Clearing by 6:00 p.m.
Settlement Method Deliverable
Underlying Ultra U.S. Treasury Bond Futures

Notes[edit]

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

Resources[edit]

References[edit]