Interest Rates Futures

In 1975 the first interest market contract was introduced on the Chicago Board of Trade (CBOT). Even though these contracts have relatively new beginnings, they are some of the most actively traded futures contracts and options on futures. The point of this futures contract is for a buyer and seller to agree on a price of an interest paying instrument. The most popular contracts are 30-Year T-Bonds, 10-Year T-Notes, and SOFR (Secured Overnight Financing Rate). These futures contracts are large in size and experience is needed to properly navigate these markets.

Popular Interest Rate Futures

10-Year T-Note Futures

Also known as a 10-Year T-Note, this debt obligation issued by the U.S. government reaches maturity in 10 years. Over that time, the note will pay interest every six months. At the end of 10 years the holder will be paid its face value. Traded on the Chicago Board of Trade (CBOT), this futures contract is used to speculate on the direction of interest rates.

30-Year T-Bond Futures

Also known as a 30-Year T-Bond, is a U.S. government debt security, with a maturity of 30 years. Over that time, the bond will pay interest every six months and that income is only taxed on a federal level. When the bond reaches maturity, the holder will be paid the face value of the bond. Traded on the Chicago Board of Trade (CBOT), this futures contract is used to speculate on the direction of interest rates

SOFR Futures

Three-month SOFR (Secured Overnight Financing Rate) futures are financial contracts traded on exchanges like the CME Group. These futures predict and hedge against changes in the SOFR, which is a benchmark interest rate for dollar-denominated derivatives and loans. Each contract reflects the expected average overnight interest rate over a three-month period, providing investors with tools to manage interest rate risk effectively.

5-Year T-Note Futures

Five-Year T-Note futures are financial contracts that represent predictions about the future value of U.S. Treasury notes with a five-year maturity. Traded on exchanges like the CME Group, these futures allow investors to speculate on and manage the risk associated with changes in interest rates. Each contract reflects the price movement of $100,000 worth of Treasury notes, serving as a crucial tool for financial planning and risk management.