10-Year T-Note Futures

Market

Bond futures are futures contracts where the commodity to be delivered is a government bond that meets the standard outlined in the futures contract (e.g., the bond has a specified remaining time to maturity). The 10-hear Treasury note futures, or 10-year T-note futures, are a debt obligation issued by the U.S. government that matures in 10 years. A 10-year Treasury note futures contract pays interest at a fixed rate once every six months and pays the face value to the holder at maturity. An advantage of investing in 10-year Treasury notes is the interest payments are exempt from state and local income tax; however, they are still taxable at the federal level.

History

Interest rate futures were pioneered by the Chicago Board of Trade in 1975, in response to a growing need for tools that could protect against sharp and frequent swings in the cost of money.

Facts

Participating in 10-year T-note futures allows a trader to assess directionality of interest rates as well the ability to hedge risk at the end of a yield curve. Participating in 10-year T-note futures can also allow one to use a variety of trading strategies like spread trading and trading against different Treasury futures contracts. 10-year note futures have experienced large-scale success as the scale and global significance of U.S. Treasury investment has grown over the years. The products are used internationally by institutional and individual investors for purposes of both abating and assuming risk exposures. When there are shocks or bad news in the market, investors flock to the U.S. Treasury bonds and notes (and futures) for a safe haven to protect their capital. This is referred to as a “flight-to-quality” investing and usually drives interest rates lower. However, when the economy faces good news, investors abandon the safety of Treasury bonds and invest in other products that offer more attractive yields. This causes prices to drop and interest rates to rise.

Trading

  • 10-year note futures are traded at the Chicago Mercantile Exchange.
  • One U.S. Treasury note has a face value at maturity of $100,000.
  • The first five consecutive contracts in the March, June, September and December quarterly cycle.
  • Two, three, five and seven-year Treasury note futures are also traded through the CME.
  • The 10-year U.S. Treasury note futures market is high-volume, adding to its liquidity. Supply and demand levels are solid and easy to identify.

 

Contract Specifications  

Contract SymbolContract UnitPrice Quotation
Z15$100,000dollars per contract
Trading ExchangeTrading HoursTick Value
CME GLOBEX17:00 - 16:001/2 of 1/32 = $15.625

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This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.