Speculate in big interest rate moves with micro-sized exposure. 

We now offer trading in micro-sized Treasury yield 10-year note futures listed on the CME Group!

Symbol - 10Y
Margin - $264

What are Treasury Yield Futures and how can they be used to speculate on interest rates?

Traditional Treasury futures contracts provide excellent liquidity and efficiency for those looking to speculate or hedge changes in interest rates. However, confusion over how they are quoted and what they represent has worked against attracting new traders into the fold.

The new micro Treasuries listed by the CME Group trade in yield, rather than price. Specifically, the Micro Treasury yield futures track the BrokerTec US Treasury Benchmark which is based on the most recently auctioned security. The elimination of the yield conversion calculation from futures price to yield offers a simplicity capable of attracting traders of all sizes and skill levels to the interest rate futures arena. This is a big step toward leveling the playing field for market participants and improving liquidity. Further, the micro-sized contracts allow strategies that were otherwise only available to those with large trading accounts such as dollar-cost averaging, also known as scaling in and out of trades incrementally.

A trader who believes the 10-year note yield will fall from 1.9% to 1.0% could sell a micro futures contract to act upon a speculative opinion. The expected move represents a profit of about $900 prior to transaction cost and can be employed with a margin requirement of just $264! Of course, an adverse move in the same magnitude would produce a similar loss.

These new micro-sized Treasury securities are cash settled rather than physically delivered. This means traders of these products don’t have to fear the complications and stress of First Notice Day or contract expiration. Instead, any position held to expiration is simply cash settled on the date the held contract ceases to exist. Even though, I would suggest always offsetting and/or rolling futures positions prior to expiration rather than letting it cash settle.

In summary, thanks to the CME Group’s Micro Treasury Futures; trading interest rate futures is now a simpler endeavor with lower to barriers to entry.

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