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Australian bond derivatives

Australian 3 year and 10 year treasury bond futures and options   

ASX’s 3 and 10 year treasury bond futures and options are the benchmark derivative products for investors trading and hedging medium to long term Australian Dollar interest rates. The 3 and 10 year treasury bond contracts are cost effective tools for enhancing portfolio performance, managing risk and outright trading. 

The 3 and 10 year treasury bond contracts provide an efficient way to gain exposure to the Australian debt markets. This makes them ideal for short term trading, long term trend following, and hedging of medium to long term AUD fixed interest securities and interest rate swaps.

Completing the suite of bond derivative products, ASX also offers one session options – intra-day options and overnight options – which are available to trade over a single ASX Trade24 session.

The 3 and 10 year treasury bond futures and options are approved for trading by:

  • US Commodities Futures Trading Commission (CFTC)
  • UK Financial Services Authority (FSA)
  • Monetary Authority of Singapore (MAS) and
  • Hong Kong Securities and Futures Commission (SFC Hong Kong).

3 and 10 year bond futures features

  • The 3 and 10 year treasury bond futures contracts are ranked amongst the 10 most traded long term interest rate futures contracts in the world today.
  • Average daily turnover in 2013 was 190,000 and 88,000 contracts for the 3 and 10 year treasury bond futures, respectively.
  • Contract Unit: Commonwealth Government Treasury Bonds with a face value of A$100,000, a coupon rate of 6% per annum and a term to maturity of ten years.
  • Cash settled – 3 and 10 year treasury bond futures are cash settled against the average price of a basket of Commonwealth Government bonds.
  • Variable tick value – 3 year and 10 year treasury bond futures are traded on the basis of their yield with the futures price quoted as 100 minus the yield to maturity expressed in per cent per annum. Due to this convention the dollar value of the minimum price movement, or tick value, does not remain constant but rather changes in accordance with movements in the underlying interest rate.

The Commonwealth Government Securities Market

The Commonwealth Government of Australia is the benchmark issuer in the medium to long term debt market. Fixed coupon Commonwealth Government Bonds constitute the bulk of debt issued by the Australian Federal Government. Currently there are twenty benchmark lines issued with a maximum maturity of 19 years and totalling approximately A$293 billion on issue as at 24 April 2014. Market turnover in 2012-13 reached A$975 billion1. For further information please see The Australian Office of Financial Management website:

Quarterly and serial options

  • Quarterly options expire in the same calendar month as the underlying futures contract. Serial options are listed in non-financial quarter months.
  • Pre-negotiated business rules are applicable to quarterly and serial 3 year and 10 year treasury bond options. These rules provide Participants the opportunity to facilitate client business off-market prior to disclosing and then crossing orders on the trading platform ASX Trade24.

Trading ASX 3 and 10 year bond futures

  • Trading in ASX’s 3 and 10 year treasury bond futures and options is conducted ‘on market’ via ASX 24’s electronic platform ASX Trade24 and ‘off-market’ through exchange for physicals transactions and the block trade facility (night sessions only).
  • Spread trading functionality is available for calendar and inter commodity spreads
  • Attractive spread concessions are available on calendar spreads as well as inter commodity spreads for offsetting positions held in other interest rate futures.

1 2013 Australian Financial Markets Report - AFMA