Interest rate futures are medium-term, long-term and short-term deliverable financial vouchers of trading objects, and are financial futures based on securities. In fact, it is a short-term investment with a fixed term and a standard transaction amount in the trading market, and it is a forward contract for money market and capital market instruments. Like other futures, interest rate futures are also subject to legal constraints. Through open market bidding, buyers and sellers agree to deliver a certain amount of securities at an agreed interest rate on a specified date in the future. The market price of these securities is deeply influenced by the fluctuation of market interest rate. If the interest rate rises, its market price will fall. If the interest rate falls, its market price will rise. There are many factors that affect the interest rate level, but the main factors are: the government's fiscal policy, monetary policy, inflation, national production and income, and national demand for cars and houses, all of which will affect the interest rate trend. Interest rate fluctuation makes both borrowers and borrowers in financial markets face interest rate risk. In order to avoid or reduce interest rate risk, interest rate futures came into being. Interest rate futures are different from forward interest rates. The latter's contract transactions are limited to the banking system and do not involve exchanges, so there is no unified transaction supervision. Moreover, the transaction object is a currency with a specific amount and interest-bearing period. [ 1]

Chinese name

Interest rate futures

classify

Short-term interest rate futures and long-term interest rate futures

Earliest submission time

1975 10 month

Push-out device

Chicago Board of Trade

definition

The medium-term, long-term and short-term deliverable financial vouchers of the transaction object are subject to interest-bearing securities.

quick

navigate by water/air

Classification characteristics, basic functions and development prospects of terms related to delivery methods

Development history

Interest rate futures contract was first introduced by Chicago Board of Trade on June 1975, and interest rate futures trading has developed rapidly since then. 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 interest rate futures, the size of the US Treasury bond market has risen sharply.

Since the mid-1970s, in order to manage the domestic economy and stabilize the freely floating exchange rate, western countries have implemented financial liberalization policies, and the previous interest rate controls have been relaxed or even cancelled, resulting in increasingly frequent and intense interest rate fluctuations. Facing the increasingly serious interest rate risk, all kinds of financial commodity holders, especially all kinds of financial institutions, urgently need a simple, feasible and effective tool to manage interest rate risk. Interest rate futures came into being under this background.

1975 10, Chicago Board of Trade launched the mortgage certificate futures contract of National Mortgage Association (GNMA), which marked the birth of interest rate futures, a new financial futures product. Shortly thereafter, in order to meet the needs of people to manage short-term interest rate risks, the international money market of Chicago Mercantile Exchange launched a three-month US Treasury futures trading, which was a great success. It is the most active short-term interest rate futures in the second half of 1970s.