Market participants can use 13-week U.S. Treasury Bill futures from CME Group to hedge and express their views on the yields of Treasury bills, also referred to as T-bills.
What are T-bills?
U.S. Treasury bills are a type of fixed income security – similar to notes or bonds – that are issued and backed by the U.S. Treasury Department. They are short dated with maturities of one year or less. T-bills do not pay periodic coupon interest like notes and bonds; instead, they are auctioned to investors at a discount to their face value.
T-bills are auctioned based on a pre-announced schedule, with 13-week bills typically being offered weekly. Auctions are usually announced on Thursdays and take place the following Monday. Settlement occurs the Thursday after the auction takes place. In the event of federal holidays, auctions will take place on Tuesdays, though settlement will still occur on the following Thursday.
T-bill auctions
In T-bill auctions, participants submit the maximum discount to par that they are willing to accept in order to purchase the bill in question.
The Treasury department then ranks these bids and chooses a discount yield that is high enough to ensure there are enough bids to clear the amount of bills that are being auctioned off.
An investor will be successfully allocated T-bills at auction if they bid a rate that is lower than the rate selected by the Treasury. All investors’ bids are cleared at this same rate, which is known as the highest accepted rate.
Upon expiry, T-Bill futures are cash-settled to a price equivalent to 100 minus the highest accepted discount yield on the auction that takes place on the same week as the contract’s expiry.
T-Bill futures product information
The specifications of the 13-Week U.S. Treasury Bill futures are similar to other short-term Interest Rate contracts at CME Group.
The contract size is defined by the IMM index at $2,500 per percentage point, or $25 per basis point.
The price of a 13-Week U.S. Treasury Bill futures contract trades in increments of one-half of a basis point until the contract has one month or less until its last day of trading, at which point it’s further reduced to one-fourth of a basis point.
The last trading day usually falls on the Monday in the same week as the contract’s expiry. Trading in an expiring contract will terminate at 2:00 p.m. Central Time. In the event that Monday is a holiday, the last trading day will move to Tuesday.
For more information, visit cmegroup.com/tbill.
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