Derivatives market operator, CME Group, reports that open interest (OI) in its US Treasury futures reached a record 17,222,551 contracts on 12 May, the fifth consecutive day of record OI. Prior to the record week, the previous OI record of 16,698,659 contracts was set on 19 February 2020.
“The market is clearly pricing in a premium for potentially large moves in either direction depending on the outcome of Biden’s talks with Congress,” said Muhammed Demir, head of capital markets at broker Swiss Finance Corporation. “Also, the fact that open interest positions are so high is a clear implication of market uncertainty around the future price. While unlikely, there is a chance that the Fed could remove any defaulted treasury securities from circulation, either purchasing the affected notes or swapping those for others it owned.”
CME Group provides the central limit order book for every tenor of US Treasury futures, which trade side-by-side on the CME Globex platform with BrokerTec cash securities. Clients can also privately negotiate transactions in the form of blocks, exchange for risk (EFR) and exchange of futures for physical (EFP) agreements under the rules of the Chicago Board of Trade (CBOT). Clients using these tools to manage risk include sovereigns, banks, asset managers, hedge funds, principal trading firms and other institutions.
“Market participants continue to turn to our deeply liquid US Treasury futures in record numbers as they navigate historic uncertainty and manage fixed income risk,” said Agha Mirza, CME Group global head of rates and OTC products. “With growing demand for risk transfer in the world’s largest bond market, reaching a record 1,697 large OI holders earlier this year, we remain focused on providing capital and operational efficiencies across our global client base.”
Since US Treasury futures began trading on CME Globex in January 2008, OI in these products has nearly tripled, growing from 6 million contracts to 12 May’s record 17.2 million contracts.
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