Example

Assume you have a short position of 100 contracts ($10M) in the 4.0% for Dec-22. You need to roll out of the short position and into one in the 4.5% coupon for Dec-22. You can do this by selling 100 of the Dec-22 4.5%/4.0% coupon swaps.

Prior to the “3:00 p.m. close” on the afternoon of November 17, 2022, the Dec-22 4.5%/4.0% coupon swap was observed trading on CME Globex with bid price of 2’205 and an offer price of 2’243. On the bid side, 20 of the 45 contracts were implied from other markets, nearly doubling the size of the top of the order book. The implied bid matched the observed bid, and the observed offer was better (lower price) than the implied offer in the spread.

Meanwhile, the Dec-22 4.5% had a bid/offer of 96’165/96’190, and the Dec-22 4.0% had a bid/offer of 93’247/93’280. Later that day, the Dec-22 4.0% and 4.5% coupons settled at prices of 93’262 and 96’185, respectively.

Please refer to Exhibit 1 for the recent markets observed on CME Globex.

Exhibit 1: TBA futures and coupon swap markets on November 17, 2022

fig
Source: CME Group

Please refer to Exhibit 2 for the breakdown of implied and observed markets in the coupon swap being executed.

Exhibit 2: Breaking down implied and actual markets in the coupon swap of TBA futures

fig
Source: CME Group

Want to learn more about implied orders? Visit our confluence page here.


Jonathan Kronstein
Jonathan Kronstein
Jonathan Kronstein

is a Senior Director in the Research & Product Development Department of CME Group. Between 2004 and July 2007, he served as Senior Economist with the Chicago Board of Trade (now CME Group), and he joined CBOT in 2002.

Kronstein earned Bachelor of Arts degrees in economics and philosophy from the University of Notre Dame and Master of Business Administration degrees in economics and finance from the University of Chicago Booth School of Business.

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2025 CME Group Inc. All rights reserved.