NEW YORK—CME Group Inc. said on Monday it will launch futures on 20-year U.S. Treasury bonds on March 7, pending regulatory review, to help investors better manage their U.S. Treasury curve exposure.
The U.S. Treasury Department reintroduced 20-year bonds in May 2020 and increased securities auction sizes across a range of maturities to raise cash to meet record government borrowing needs at the beginning of the COVID-19 outbreak.
Total issuance since March 2020 of 20-year Treasury bonds, which the government had phased out in 1986, has been over $450 billion, creating customer demand for a new product that establishes 20-year yield exposure, said Agha Mirza, global head of rates and OTC products at CME.
“The introduction of a futures contract on the U.S. Treasury’s 20-Year bond responds directly to market need for a hedging tool at a time when managing U.S. Treasury market risk is more important than ever,” Mirza said.
A 20-year bond future could boost demand for the maturity by offering investors an easier way to hedge the debt, or to speculate on its future yield moves.
The Treasury Department has said it plans to reduce auction sizes of seven-year and 20-year bonds more than other maturities to address supply and demand dynamics of the Treasuries.
CME’s 20-year U.S. Treasury Bond futures will allow for delivery of original issue 20-year Treasury bonds with remaining terms to maturity at delivery of at least 19 years 2 months and not more than 20 years, the exchange and clearinghouse operator said.
Chicago-based CME said its existing suite of Treasury futures and options grew more than 15 percent year-over-year in 2021 to a record 4.5 million average daily volume.