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5-Year T-Note June 2012 (ZFM12)

124-035s-0-075 (-0.19%) 7:05P EDT (CBOT)
Commodity Price Quote as of Sunday, May 19th, 2013 View Help

Contract Specifications

Symbol ZF
Name 5-Year Treasury-Note (ZF)
Exchange CBOT
Trading Months March, June, September, December (H, M, U, Z)
Trading Unit $100,000
Tick Size One quarter of 1/32 of a point ($7.8125 per contract) rounded up to the nearest cent per contract; par is on the basis of 100 points
Daily Limit None
Trading Hours 5:00p.m. - 4:00p.m. (Sun-Fri) CST
Last Trading Day The last business day of the calendar month
Value of one futures unit $1,000
Value of one options unit $1,000

CRB Yearbook Description

U.S. interest rates can be characterized in two main ways, by credit quality and by maturity. Credit quality refers to the level of risk associated with a particular borrower. U.S. Treasury securities, for example, carry the lowest risk. Maturity refers to the time at which the security matures and must be repaid. Treasury securities carry the full spectrum of maturities, from short-term cash management bills, to T-bills (4-weeks, 3-months, and 6-months), T-notes (2-year, 3-year, 5-year and 10-year), and 30-year T-bonds. The most active futures markets are the Treasury note and bond futures and the Eurodollar futures, which are all traded at the CME Group.

Prices - 10-year T-note futures prices showed some weakness in early 2011 due to the strengthening U.S. economy and talk that the Fed might soon be forced to start retracting some of its extraordinary liquidity. However, T-note prices then started a sharp rally in April 2011 that eventually took T-note prices to new record highs. The T-note rally during spring was caused by several factors including the weak U.S. economy seen during the first half of 2011 and safe-haven demand caused by the worsening European debt crisis.

T-note prices in early 2011 also continued to benefit from the Federal Reserve's second quantitative easing program, which was known as QE2. During the QE2 program, the Federal Reserve purchased a total of $600 billion of Treasury securities from November 2010 through July 2011. That added to the Fed's existing program announced in August 2010 of reinvesting the proceeds from maturing securities in the purchase of new Treasury securities. The Fed's QE2 program brought the Fed's balance sheet asset level to about $2.9 billion by June 2011, representing an extra $2 trillion of liquidity above the Fed's normal asset level of $900 billion.

T-note prices were also boosted in early summer 2011 by the U.S. debt ceiling debacle, which hurt the U.S. economy by causing fears among investors that the U.S. Treasury might default on its debt for the first time in history. Budget hawks initially refused to go along with a routine U.S. debt ceiling hike and only backed down after some alarming brinkmanship. Standard & Poors subsequently downgraded the U.S. credit rating to AA+ from AAA, which was the first time in history that the U.S. lost its triple A credit rating. S&P took away the AAA rating because of the lack of progress by the federal government in curbing is massive budget deficit and its growing national debt. There were some fears at the time that T-note prices might plunge on the perception of higher risk on U.S. Treasury securities. However, T-note prices actually rallied because of the damage to the U.S. economy and because the U.S. credit rating downgrade made clear that Europe would be next in line for downgrades.

The Fed in mid 2011 once again became alarmed about the weak U.S. economy. In an attempt to bring long-term Treasury yields down even further, the Fed in September 2011 began its $400 billion Operation Twist program. The Fed with that program sold shorter-term Treasury securities from its portfolio and used the cash to buy longer-term T-note securities. The program, which is due to last until June 2012, was a significant factor in boosting longer-term T-note prices in late 2011. T-note prices were also boosted in the second half of 2011 by safe-haven demand tied to the European banking crisis, which nearly caused an all-out European systemic banking crisis before the European Central Bank cut rates and announced unlimited 36-month loan operations in November and December 2011.

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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