Short-term interest rate futures are based on short-term interest rate bonds, generally settled in cash, and their prices are expressed by 100 minus the interest rate level. The two most common short-term interest rate futures are short-term treasury bonds futures and Eurodollar futures.
The term of short-term treasury bills is divided into three months (13 weeks or 9 1 day), six months (26 weeks or 182 days) or 1 year. Among them, 3-month and 6-month treasury bonds are generally issued weekly, and 3-year treasury bonds are generally issued monthly. Unlike other government bonds that pay interest every six months, short-term government bonds are discounted at face value, and the investment income is the difference between the discounted price and face value. Interest rate futures can generally be divided into short-term interest rate futures and long-term interest rate futures. The former is based on the three-month interest rate in the interbank lending market, while the latter is based on long-term bonds with a maturity of more than five years. The fluctuation of interest rate makes both borrowers and borrowers in the financial market face interest rate risk, especially more and more investors holding government bonds need tools to avoid risks and hedge. In this case, interest rate futures came into being. The earliest interest rate futures business was the United States. At the end of 1970s, due to the influence of two oil crises, interest rates in the United States and major western capitalist countries fluctuated sharply, which made both borrowers and borrowers face great risks. In order to reduce or avoid the risk of interest rate fluctuation,1September 1975, the Chicago Mercantile Exchange first introduced the interest rate flower-mortgage certificate futures of the National Mortgage Association of the United States, and then introduced the interest rate futures of financial instruments such as short-term treasury bills, medium-and long-term treasury bills, time deposit certificates of commercial banks, and European dollar deposits. In 1980s, Britain, Japan, Canada, Australia, France, Germany, Hong Kong and other countries and regions launched their own interest rate futures.
Because all kinds of debt instruments are extremely sensitive to interest rates, a slight fluctuation in interest rates will lead to a large fluctuation in their prices, which will bring great risks to their holders. In order to control interest rate risk and reduce the impact of interest rate fluctuation, people have created interest rate futures to achieve this goal. Interest rate futures refer to futures contracts with bond securities as the subject matter, which can avoid the risk of securities price changes caused by bank interest rate fluctuations. Interest rate futures is the activity of buying and selling interest rates and interest-related financial products (interest-bearing certificates) futures contracts in the financial futures market and delivering them on a specific date.
Under the condition of market economy, interest rate often changes as a lever to adjust the economy, especially in the economic life of western countries, the sharp fluctuation of interest rate is an important economic phenomenon. For example, 1974, the preferential interest rate in the United States is 14%, 1976 falls to 6%, and 1979 rises to15.7%; April 1980 and February 12 were as high as 20% and 2 1.5% respectively. The fluctuation of interest rate brings great risks to the production and operation of enterprises and financial institutions. The emergence of interest rate futures meets the requirements of investors to avoid the risk of interest rate fluctuations. 1975 10, the Chicago Mercantile Exchange launched the interest rate futures trading of the National Mortgage Association mortgage deposit certificate (GNMA) for the first time, which is the first of its kind. Subsequently, other futures exchanges in the United States also launched various interest rate futures contracts. In recent years, the trading volume of interest rate futures has made a huge breakthrough. During the period of 1984, the trading volume of interest rate futures accounted for 28% of the whole futures trading volume of Meituan, ranking second to none in all kinds of futures trading. At the same time, exchanges in other countries in the world have also launched interest rate futures trading. Although interest rate futures came into being more than three years later than foreign exchange futures, its development speed is much faster and its application scope is far wider than foreign exchange futures. In countries and regions where futures trading is relatively developed, interest rate futures have already surpassed agricultural futures and become a category with the largest trading volume. In the United States, the trading volume of interest rate futures has even accounted for more than half of the total futures trading.
Due to various factors such as design and demand, not all interest rate futures contracts are successful. Among many existing interest rate futures, transactions tend to be concentrated. Take the United States as an example Generally speaking, almost all important and actively traded interest rate futures are concentrated in two exchanges: Chicago Board of Trade and Chicago Mercantile Exchange (International Money Market Division). These two exchanges mainly focus on long-term interest rate futures and short-term interest rate futures. Among the long-term interest rate futures, the most representative ones are US long-term treasury bonds futures and 10-year US medium-term treasury bonds futures, while the representative varieties of short-term interest rate futures are 3-month US short-term treasury bonds futures and 3-month European dollar time deposit futures.