CME Group’s (NASDAQ:) T-Bill futures, which launched last Monday, have already seen significant trading activity with more than 6,000 contracts traded and open interest of more than 1,500 contracts. The product has quickly gained traction among clients like JP Morgan and DRW, who use these cash-settled futures to manage the return risks associated with short-term U.S. Treasury bonds.
The futures are based on the discount yield on the auction of US government bonds over a period of thirteen weeks. JP Morgan’s Eric Birenberg and DRW’s Andrew Hennelly indicated that their firms plan to use these futures to trade spreads between SOFR futures and T-Bill futures. This approach provides efficient risk hedging and increased liquidity.
The launch of T-Bill futures comes at a time when the US Treasury market is experiencing record risk transfer, with open interest reaching $2.4 trillion this year, up 49% year-over-year. The surge in activity involved more than 25 market participants.
T-Bill futures are recognized as a capital-efficient risk management tool, providing opportunities for spread trading between commodities and margin compensation. They will soon be eligible for portfolio margins against other cleared interest rate swaps and futures.
This development coincides with a broader increase in CME’s Treasury futures supply, which has seen a 49% increase over last year, reaching an unprecedented open interest of $2.4 trillion. Investors use these futures to efficiently manage the yield risk associated with 13-week U.S. Treasury bonds.
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