Yield spread futures will help manage government bond risk

LONDON, April 21, 2011 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, has announced today that it will introduce cash-settled Sovereign Yield Spread futures beginning May 22 for a trade date of May 23. The six countries represented in the initial launch phase include France (OAT), Germany (Bund), Italy (BTP), Netherlands (DSL), United Kingdom (Treasury Gilts), and United States (Treasury Notes). These products are listed by and subject to the rules of CME, and further diversifies CME Group’s Interest Rates product portfolio.

To view the multimedia assets associated with this release, please click: http://multivu.prnewswire.com/mnr/cmegroup/49742/

"We have had many discussions during the past several months with asset managers, investment banks and hedge funds about their U.S. and European government bond portfolio needs, and the message to us was clear – design a contract that provides capital efficiencies through one clearing facility that is cost effective and meets the regulatory requirements," said Robin Ross, Managing Director, Interest Rate Products for CME Group. "Our new Sovereign Yield Spread contracts will be key risk management tools for anyone with exposure to U.S. and European government bonds and will help facilitate the price and risk transparency that global central banks desire."

Key features and benefits of the new contract include the following:

  • Sovereign Yield Spread futures wrap a sovereign yield spread exposure into a single futures contract – with no need to execute and manage individual legs in cash bond/repo markets or across multiple futures exchanges.
  • Sovereign Yield Spread futures make trading and monitoring of sovereign yield spread exposures simpler, more cost-effective, and more capital efficient than ever before.
  • Sovereign Yield Spread futures are cash-settled and trade exclusively on CME Globex.

View a video discussion of Sovereign Yield Spread futures here: http://cmegroup.mediaroom.com/index.php?s=129 and read a new research paper from CME Group here: http://cmegroup.mediaroom.com/index.php?s=114

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