US 30 Year T-Bond Futures (USc1)


The 30 Year T-Bond is an interest-bearing security backed by the full faith and credit of the United States government, with a fixed rate of return and payments due every six months. A bond contract is a legally binding agreement to buy or sell a specified amount of the underlying security at a set price on or before a future delivery date.

More About US 30 Year T-Bond Futures (USc1)

Continue reading to learn more about:

How do Treasury bond futures work?
How are US Treasury futures prices calculated?
How do you trade Treasury bonds?
Does the US Treasury still issue 30-year bonds?
Do Treasury futures have convexity?


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How do Treasury bond futures work?


Treasury bond futures allow traders to gain exposure to the Treasury bond market without actually having to own and manage a bond outright. This is because, unlike Treasury bonds, bond futures are traded on an exchange and enable the trader to take part in the price movement of the asset without actually owning it.


 
 

How are US Treasury futures prices calculated?


US Treasury futures prices are calculated based on the underlying US Treasury bond market prices. An exact quote for the underlying bond is tested against a pricing formula to see if it clears the market by trading at least one tick above or below the theoretical price. Clearing prices are calculated every few milliseconds when markets are open.

 

How do you trade Treasury bonds?

Treasury bonds are not an easy investment with low liquidity. The biggest advantage to trading T-Bonds is their stability. As the US government has never defaulted on its debt, T-Bonds are one of the safest investments available.
Investing in Treasury Bonds is generally considered to be the safest investment possible, short of buying direct government notes and bills themselves. T-Bonds typically yield less than other higher-risk securities with similar durations, like corporate bonds or municipal bonds.
 
  • Does the US Treasury still issue 30-year bonds?

    After the financial crisis in the US, a 30-year bond was no longer issued by the government. But we can still buy and sell futures contracts on 30-year bonds on the exchanges. Future contracts are invaluable tools for hedgers who want to lock in a price for something they are buying or selling in the future. And speculators can cash in on volatile markets by betting that prices will move one way or another.
  • Do Treasury futures have convexity?

    Treasury futures are convex because certain factors, such as a reduction in interest rates, tend to push their prices much higher than the converse situation, such as a rise in interest rates.