What Are Treasury Bond Futures?

Treasury futures (Treasury futures) refer to the Treasury-derived transaction method in which the buying and selling prices are determined in advance through organized trading venues and the coupons are delivered within a specific time in the future. Treasury futures are a type of financial futures, and they are advanced financial derivatives. It was created in the 1970s in the context of the instability of US financial markets to meet investors' need to hedge interest rate risks. US Treasury futures are one of the most actively traded financial futures in the world. On September 6, 2013, government bond futures were officially listed on the China Financial Futures Exchange.

Treasury futures

Treasury futures refers to pre-determined buying and selling prices through organized trading venues and carrying out specific future time

Treasury futures are a type of financial futures, and they are advanced financial derivatives. It was created in the 1970s in the context of the instability of US financial markets to meet investors' need to hedge interest rate risks.

Futures trading is a complex

1, trading unit (trading unit): also known as contract size (contract size), refers to the exchange for each

The trading strategy of treasury bond futures varies according to the purpose, and it is mainly divided into three trading methods: speculation, arbitrage and hedging. Each trading method has a different trading strategy.

From the perspective of the factors affecting the price of government bonds, Zhang Shengchang suggested that investors focus on the central bank's

China Financial Futures Exchange announced on September 2, 2013 that all preparations for the listing of treasury bond futures were completed. The first three five-year Treasury futures contracts will be listed and traded on September 6. ^[1]

Treasury futures themselves are a

On February 13, 2012, China Treasury futures simulation trading restarted. According to the "China Financial Futures Exchange 5-year Treasury Futures Simulation Trading Contract" rules, the 5-year Treasury bonds

The market's recent interest in treasury bond futures is heating up again. As a landmark product in the process of interest rate marketization, the launch of treasury bond futures will improve the pricing efficiency of the bond market (especially interest rate products), enhance market liquidity, promote interoperability between the interbank and exchange markets, promote the process of interest rate marketization, and finance Innovative development is of great significance to institutional investors' fixed income investment and the development of wealth management business.

Specific to the investment business, the main investment models related to treasury futures include: First, directional trading can be used as a substitute for cash bond investment, which has the advantages of convenient short selling, less capital occupation, low rates, and good liquidity. High leverage makes it suitable for investors with high risk appetite.

Secondly, hedging and duration adjustment will be the main participation model for institutional investors. In addition to hedging bond positions, he will also hedging bond issuance and underwriting.

Third, futures arbitrage trading (basis trading), which is the most interesting business model in the market, is mainly divided into buying basis trading and selling basis trading. It should be noted that, and

China Securities Regulatory Commission (Zheng Jian Han [2013] No. 178) has officially approved the listing of 5-year Treasury bond futures contracts on the China Financial Futures Exchange. Matters related to the listing and trading of 5-year Treasury futures contracts are as follows:

I. Listing and trading time

The 5-year Treasury futures contract will be listed and traded on Friday, September 6, 2013.

Benchmark prices for listed trading contracts and listings

The first batch of listed contracts for 5-year Treasury futures were December 2013 (TF1312), March 2014 (TF1403) and June 2014 (TF1406). The benchmark price of each contract is announced by the exchange on the trading day before the contract is listed for trading.

Deliverable Treasury Bonds and Conversion Factors

The deliverable government bonds and conversion factors for each contract of the 5-year government bond futures are announced by the exchange before the contract is listed for trading.

Fourth, trading margin and daily limit

In order to strictly control the market risk at the initial stage of listing, the trading margin of each contract of the 5-year Treasury futures contract is tentatively set at 3% of the contract value. From the settlement of the previous trading day in the middle of the month before the delivery month, the trading margin is tentatively set to the contract value The transaction margin is tentatively set at 5% of the contract value from the time of settlement on the trading day before the end of the month before the delivery month. The price range of each contract on the first day of listing is ± 4% of the benchmark price.

V. Related expenses

The five-year Treasury futures contract is tentatively set at 3 yuan per lot, and the delivery fee standard is 5 yuan per lot. The transaction ownership adjusts the fee standard according to the market operation.

After the suspension of trading of government bond futures for 18 years, the benchmark price of the 5-year government bond futures contract listed on the China Financial Futures Exchange for the first time on September 6, 2013:

The benchmark price of the TF1312 contract is 94.168 yuan; the benchmark price of the TF1403 contract is 94.188 yuan; the benchmark price of the TF1406 contract is 94.218 yuan.

1. Trading unit: Treasury futures contract, each valued at 1 million.

2. Minimum change price: The minimum change price is 0.005 yuan.

4. Daily price fluctuation limit: The daily limit is limited to ± 2% of the settlement price of the previous trading day.

5. Trading time: The trading time is 9: 15-11: 30 am, 13: 00-15: 15 pm, and the trading time of the last trading day of the contract is 9: 15-11: 30 am.

6. Last trading day: The last trading day of the contract is the second Friday of the expiration month

7. Delivery arrangements: The last delivery day is the third trading day of the last trading day, and the physical delivery method is adopted.

Looking back at the event

China Treasury futures trading began on December 28, 1992. 327 is the code of the Treasury futures contract, which corresponds to the 3-year Treasury bills issued in June 1995, which were due in June 1995. The total amount of the bonds issued was 24 billion yuan, and the payment method was 8% of the coupon rate plus discounted interest.

On February 23, 1995, the main party of the short party was Shanghai Wanguo Securities Co., Ltd., which sold 10.56 million sell orders in the last 8 minutes, with a face value of 211.2 billion yuan, and the total amount of all 327 national bonds was only 24 billion yuan, which was confirmed as malicious violation. Later, Treasury bond futures died because of the "327 Treasury Incident." The Financial Times called it "the darkest day in the history of Chinese securities."

Painful price

After the incident, in order to save the troubled IWC and avoid possible financial turmoil, the Shanghai Municipal Government adopted a series of emergency measures to calm down the run-up of shareholders. On April 25, IWC convened a board of directors. Former chairman Xu Qingxiong and president Guan Jinsheng both resigned. Guan Jinsheng was also fired from Wanguo Securities, which he founded.

On September 15, Wei Wenyuan, the first general manager of the Shanghai Stock Exchange, also announced his resignation and left the securities arena. On September 20, the Ministry of Supervision, China Securities Regulatory Commission and others announced the investigation results and decision on the incident.

In April 1996, Wanguo merged with Shenyin Securities, its former strongest competitor in the Shanghai market. On July 17, the same year, Shenyin Wanguo was established. In January 1997, Guan Jinsheng was sentenced to 17 years in prison by the Shanghai High Court.

Pause event does not repeat

When it comes to the ups and downs of the year, many old investors are still worried. However, it is precisely because of the profound lessons of the "March 27" Treasury futures incident that gave more inspiration to posterity. Today's treasury bond futures program is no longer comparable to that year's treasury bond futures. Once re-listed, the possibility of repeating the risk event of the year is very small.

At present, China's economic and financial situation has undergone fundamental changes, and interest rate liberalization has made significant progress. The national debt market is large in size, complete in variety, and has a large number of participating institutions. The market infrastructure has been greatly strengthened, and the regulatory system and laws and regulations have been comparable. perfect. It can be said that the development of China's national debt market and futures market has made great progress at present, and the regulatory system and risk mechanism of the futures market are becoming more and more perfect, which has induced a fundamental change in the market environment similar to the "3.27" national debt event. ^[2]

On February 13, 2012, China Securities Exchange launched the simulation of treasury bond futures

Denomination: 1 million yuan;

Coupon rate: 5% nominal 5-year standard government bond is the subject of the contract;

Contract month: the most recent three quarter months (3, 6, 9, and 12 quarter-month cycles);

Maximum daily price fluctuation limit: ± 2% of the settlement price on the previous trading day;

The minimum trading margin is 2% of the contract value;

The minimum change price is 0.0002 points;

The transaction fee is 5 yuan / lot;

Delivery method: physical delivery;

Deliverable bonds are fixed interest government bonds with a remaining maturity of 4 to 7 years (excluding 7 years) on the last delivery date;

Contract code: TF

Market size

At present, the scale of China's bonds continues to expand. In 2012, the total national debt was approximately 1.39 trillion yuan, and the balance of national debt at the end of 2012 was approximately 7.42 trillion yuan, ranking second in Asia and sixth in the world, accounting for about GDP. 14.3%.

As of March 31, 2013, the simulation of treasury bond futures transactions has run for a total of 276 trading days. According to unilateral statistics, the cumulative transaction volume is approximately 11.85 million hands, the average daily transaction volume is approximately 43,000 hands, and the cumulative transaction volume is approximately 10.82 trillion yuan. , The average daily position is about 80,000 hands.

Successfully completed the TF1203, TF1206, TF1209, TF12012, TF1303 contract simulation delivery. The rolling delivery business process has been successfully implemented on the national debt futures simulation TF1209, TF12012, TF1303, and TF1306 contracts. ^[2]

On September 6, Treasury futures were officially listed on the China Financial Futures Exchange. Han Zheng, member of the Political Bureau of the CPC Central Committee and secretary of the Shanghai Municipal Party Committee, and Xiao Gang, chairman of the China Securities Regulatory Commission, jointly opened the market for the first day of treasury bond futures. Xiao Gang, Chairman of the China Securities Regulatory Commission, and Tu Guangshao, Executive Deputy Mayor of Shanghai, delivered speeches. Jiang Yang, deputy chairman of the China Securities Regulatory Commission, read the approval of the Securities Regulatory Commission's approval of the listing and trading of treasury bonds.

Xiao Gang said that the official listing of treasury bond futures is an important result of China s multi-level capital market construction. It is an important breakthrough in the innovative development of the futures derivatives market after stock index futures. It is also an important content to promote the construction of Shanghai's international financial center.

Xiao Gang pointed out that listed government bond futures are conducive to establishing market-based pricing benchmarks, improving the issuance system of government bonds, advancing the market-oriented reform of interest rates, and guiding the optimization of resource allocation; it is conducive to the diversification of risk management tools and provides more risk aversion for financial institutions Tools and asset allocation methods; it is conducive to improving the innovation mechanism of financial institutions and enhancing their ability to serve the real economy; it can also provide foreign investors, including central banks, hedging tools, which is conducive to advancing the process of RMB internationalization.

Xiao Gang emphasized that we must firmly grasp the fundamental requirements for serving the real economy, adhere to the direction of marketization, rule of law, and internationalization, and actively promote the reform and innovation of the futures derivatives market. It is necessary to respect the pioneering spirit of the market, activate the market's innovative ability, act in accordance with market rules, and strive to develop new varieties and new tools that meet market needs. It is necessary to accurately grasp the characteristics of the "double-edged sword" of derivatives, implement risk prevention throughout the entire process of innovation, adapt regulatory capabilities to innovative measures, and firmly hold to the bottom line that systemic and regional risks do not occur.

It is necessary to strengthen supervision and enforcement and severely crack down on market manipulation, insider trading and other illegal activities. We must persist in doing a good job of investor services and earnestly safeguard the "three public" of the market and the legitimate rights and interests of investors.

Tu Guangshao said that Treasury futures are an important strategic product, and its successful launch is a milestone important event in the construction of Shanghai International Financial Center, which will definitely have a profound and sustained impact on the construction of Shanghai International Financial Center. The Shanghai Municipal Government will make every effort to do a good job, as always, spare no effort to support the development of China's financial futures exchanges, support and serve the construction of China's financial futures market, and effectively create a good environment for all parties involved in China's financial market and provide better service. Investor representatives also spoke at the ceremony.

I. Treasury bond futures market and stock market have obvious differences in basic participants, operation methods, etc.

Participants in the Treasury futures market are closely related to participants in the spot market. They are mainly financial institutions such as commercial banks, insurance companies, securities companies, fund companies, and other professional institutional investors, corporate investors and other types of investors. They participate in the stock market. The subjects are quite different. In addition, national debt futures are highly specialized and have high technical thresholds. China implements a strict investor suitability system, and small and medium retail investors have limited participation.

Treasury futures are more suitable for institutional investors to participate

Judging from the characteristics of the price changes of T-bond futures and the risk attributes of products, the volatility of T-bond futures prices is small. For example, the maximum daily volatility of 5-year Treasury bonds and 7-year T-bond prices in the recent market are far below 2%. Therefore, it is more suitable for institutional investors to participate.

3. Treasury futures are based on the Treasury spot, and its price is ultimately determined by the spot market.

The factors affecting the stock market are more complicated, which is not only a reflection of the state of economic operation, but also a combination of multiple factors such as capital supply and demand and investor psychological expectations. The listing of treasury bond futures will not change these factors, so it will not affect the policy expectations and basic trends of the stock market. International market evidence also shows that listed government bond futures have little effect on the normal operation and trend of the stock market.

4. Treasury bond futures are highly specialized, with small fluctuations, and the number of participants in the initial listing period is limited

Judging from the practice of the Shanghai and Shenzhen 300 stock index futures market, the market has been running for more than three years, and the transaction has been relatively active, but the size of the market stock margin is only about 20 billion yuan. Compared with stock index futures, treasury bond futures are more professional and less volatile. The scale of investors is limited. The participation of institutional investors requires a process. The size of margin may be lower than that of stock index futures. It will not significantly divert stock market funds, and it will not aggravate the tightness of money in the money market. ^[2]