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10-Year Gilt 1st Front Month  (G*1)

117.79s+0.23 (+0.20%) 8:04P EDT (LIFFE)
Commodity Price Quote as of Saturday, May 25th, 2013 View Help

Contract Specifications

Symbol G
Name 10-Year Gilt (R)
Exchange LIFFE
Trading Months March, June, September, December (H, M, U, Z)
Trading Unit GBP 100,000 nominal value notional Gilt with 6% coupon
Tick Size 0.01 points (GBP 10.00 per contract)
Daily Limit None
Trading Hours 8:00a.m. points - 6:00p.m. GMT
Last Trading Day Two business days prior to the last business day in the delivery month
Value of one futures unit GBP 1,000
Value of one options unit GBP 1,000

CRB Yearbook Description

Interest rate futures contracts are widely traded throughout the world. The most popular futures contracts are generally the 10-year government bond and the 3-month interest rate contracts. In Europe, futures on German interest rates are traded at the all-electronic Eurex Exchange in Frankfurt. Futures on UK interest rates are traded at the Liffe Exchange in London. Futures on Canadian interest rates are traded at the Montreal Exchange. Futures on Japanese interest rates are traded at the Singapore Exchange (Simex) and at the Tokyo Stock Exchange. A variety of other interest rate futures contracts are traded throughout the rest of the world (please see the front of this Yearbook for a complete list).

Euro-Zone - The Eurex 10-year Euro Bund futures contract in early 2011 continued the sell-off that started in September 2010 and posted a 2-year low in April. That sell-off was due to some temporary optimism on the European debt crisis and an improvement in the European economy. However, Bund futures then rallied sharply through the remainder of 2011 and closed sharply higher on the year. The 10-year German bund yield dropped from its peak of 3.5% in April 2011 to a record low of 1.67% in September 2011, consolidating most of the rest of the year below 2%.

The strength in Bund prices during 2011 was due to the severe worsening on the European debt crisis which began a year earlier in 2010. Portugal required a bailout by April 2011, joining Ireland, which received a bailout in November 2010, and Greece, which received its first bailout in May 2010. Even worse, Spain and Italy were on the ropes in 2011. The markets knew that the Eurozone countries did not have enough firepower or political will to bail out Italy with its massive debt load of 1.9 trillion euros. Greece failed to enact its promised reforms and its debt load was set to soar to nearly 200% of GDP, a debt that Greece could not possibly repay. There was the constant threat during the year of an outright Greek default, which it was feared would spread even more contagion to the other troubled Eurozone countries. By early 2012, Greece finally met the conditions for a voluntary write-down of its debt and a second 130 billion euro bailout package.

The Greek 10-year bond yield rose above 30% and Irish and Portuguese 10-year bond yields rose as high as 12% in July 2011. Even French bond yields rose during late 2011 on fears that the troubled Eurozone nations would sink French banks and French government finances. German bond yields, on the other hand, remained low near 2% in late 2011, benefiting from safe-haven demand.

Eurozone officials finally started getting a handle on the European debt crisis in late 2011. Eurozone officials accelerated the operation of the permanent 500 billion euro European Stability Mechanism to July 2012. Eurozone officials addressed the structural defects in the Eurozone by agreeing upon a fiscal compact that required Eurozone nations to enshrine debt limits in their national constitutions and mandated automatic sanctions on nations that broke the fiscal rules. Most importantly, the European Central Bank in late 2011 cut its refinancing rate by a total of 50 bp to 1.00% and also announced two unlimited 36-month lending operations that flooded the European banking system with liquidity. These measures finally started to contain the European debt crisis. Yet as 2011 ended, the Eurozone economy was in at least a mild recession and Germany Bund yields remained low into early 2012.

UK - The Liffe 10-year Gilt futures contract rallied sharply during most of 2011. The 10-year UK gilt yield fell from the high 3% area in early 2011 to 2% by the end of the year. Gilt prices were supported during 2011 by the European debt crisis, the poor UK economy, and the government's tight fiscal policy. The Bank of England (BOE) during 2011 maintained its extremely easy monetary policy with the base rate at 0.50% and its quantitative easing program remaining in place. The BOE was unable to ease monetary policy during the year because the UK CPI rose from the low 3% area in late 2010 to a peak of +5.2% in September 2011. The CPI eased going into early 2012, however, which allowed the BOE in February 2012 to at least extend its quantitative easing program. UK GDP was dismal during 2011, falling from +1.7% y/y in Q4-2010 to as low as +0.5% y/y in Q3-2011. On the brighter side, the UK government's action to tighten fiscal policy and bring down the government's budget deficit gave investors more confidence in the UK's finances and allowed the UK to avoid spill-over contagion from the European debt crisis.

Canada - The Montreal Exchange's Canadian 10-year government note futures contract showed some weakness in early 2011 as the Canadian and U.S. economies showed some temporary signs of progress. However, 10-year Canadian note futures then rallied through most of the rest of 2011 due to the weaker Canadian and U.S. economies and increased concern about the European debt crisis. Canada's GDP was strong at +4% in December 2010, but then headed lower to +2.1% by May and June 2011. Canada's GDP temporarily improved to +3% by September 2011 but then headed lower again and hit a 2-year low of +2.0% in November 2011. The Bank of Canada during 2011 left its policy rate unchanged at 1.00% all year. Canada's CPI rose as high as +3.7% in May 2011, which prevented the Bank of Canada from considering a new easing move. However, the CPI eased to +2.1% by December 2011.

Japan - The SGX 10-year JGB futures rallied mildly during most of 2011. The 10-year JGB yield during 2011 drifted lower from a high of 1.30% in early 2011 to the 1.00% area late in the year. Japan was hit by the massive Tohoku earthquake in March 2011, which caused an enormous tsunami and a nuclear disaster. The earthquake caused Japanese GDP to fall by -6.8% (quarter-on-quarter annualized) in Q1-2011 and by -1.5% in Q2-2011. Japan's GDP showed a temporary +7.0% rise in Q3 on earthquake rebuilding, but then turned negative again to -2.3% by Q4-2011. Japan's economy was also hurt during the year by a slow-down in exports caused by weaker economic growth in China and Europe. The Bank of Japan kept its overnight rate near zero all year and continued to engage in a large quantitative easing program in an attempt to revive the Japanese economy.

Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.
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