10-Year T-Note Sep '20 (ZNU20)
|Tick Size||One half of 1/32 of a point ($15.625 per contract) rounded up to the nearest cent per contract; par is on the basis of 100 points|
|Trading Months||Mar, Jun, Sep, Dec (H, M, U, Z)|
|Trading Hours||5:00p.m. - 4:00p.m. (Sun-Fri) (Settles 2:00p.m.) CST|
|Value of One Futures Unit||$1,000|
|Value of One Options Unit||$1,000|
|Last Trading Day||Seventh business day preceding the last business day of the delivery month|
Interest rate futures contracts are widely traded throughout the world. The most popular futures contracts are generally 10-year government bonds and 3-month interest rate contracts. In Europe, futures on German interest rates are traded at the Eurex Exchange. 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 (SGX) 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 German 10-year Euro Bund futures contract (Barchart.com symbol GG) rallied sharply during 2019 and closed the year up +6.95 points. The Eurex French 10-year OAT bond futures contract (Barchart.com symbol FN) also rallied sharply and closed the year up +11.97 points. The Eurex Italy Euro BTP 10-year bond futures contract (Barchart.com symbol II) rallied sharply during 2019 and closed the year up +14.64 points.
European 10-year bond prices rallied sharply during 2019 due to the weak Eurozone economy and the ECB's resumption of its quantitative easing (QE) program in late 2019. Eurozone GDP growth during 2019 weakened to a 6-year low of +1.2% from stronger growth rates of +2.5% in 2017 and +1.9% in 2018. The Eurozone economy weakened due to trade tensions, weak overseas growth, and a recession in the Eurozone manufacturing sector. Germany, which is normally the locomotive of Europe, saw its GDP growth rate in 2019 drop to +0.6% in 2019, while France saw its growth rate ease to +1.3%. Italy saw an even weaker growth rate of +0.3%.
Eurozone bond prices during 2019 saw support from weak inflation and a continued expansive monetary policy from the European Central Bank (ECB). The Eurozone core CPI in 2019 remained weak in the narrow range of 0.8%-1.3%, well below the ECB's target of just under 2%. The ECB kept its main refinancing rate at zero percent during 2019 but was forced to cut its deposit rate by -10 basis points to -0.50% in September 2019 in a bullish factor for Eurozone bond prices.
The ECB ended its previous quantitative easing (QE) program at the end of 2018. However, the ECB was forced to start a new QE program in November 2019 with bond purchases of 20 billion euros per month, which was another bullish factor for European bond prices.
Eurozone bond prices then soared anew in March 2020 when the coronavirus pandemic engulfed Europe and hit Italy and Spain particularly hard, ensuring that the Eurozone in 2020 would see one of its worst recessions ever. The ECB responded by announcing a new QE program of buying 750 billion euros worth of Eurozone bonds.
UK - The Liffe U.K. 10-year gilt government bond futures contract (Barchart.com symbol G) rallied sharply during 2019 and closed the year up +8.21 points. Gilt prices during 2019 were supported by continued weak UK GDP growth and by a continued easy monetary policy. UK GDP in 2019 remained weak at +1.4% due to uncertainty about Britain's plan to leave the EU (referred to as "Brexit") and due to weak economic growth elsewhere in Europe and overseas. There was considerable political uncertainty during 2019 as former Prime Minister Theresa May was unable to push a Brexit bill through Parliament. That resulted in a national election in December 2019 in which the Conservative Party won a decisive majority of votes in Parliament, and Boris Johnson became the new Prime Minister. Mr. Johnson was finally able to push a Brexit bill through Parliament that allowed the UK to officially leave the EU at the end of January 2020 with a smooth transition period through the end of 2020. The Bank of England left its base rate unchanged all during 2019 in a neutral factor for gilt prices. Gilt prices then rallied sharply in early 2020 when the coronavirus pandemic arrived in the UK and assured a deep recession. The Bank of England in March 2020 quickly moved into action and slashed its base rate by 65 basis points to 0.10%. The Bank of England also increased the size of its quantitative easing program in another bullish factor for gilts.
Canada - The Montreal Exchange's Canadian 10-year government note futures contract (Barchart.com symbol CG) rallied sharply in 2019 and closed the year up +6.95 points. Canadian bond prices in 2019 were supported by the weak Canadian economy, which was undercut by trade tensions and the weaker U.S. and global economies. Canada's real GDP growth rate in 2019 eased to a 3-year low of +1.6% from +3.2% in 2017 and +2.0% in 2018. The Bank of Canada (BOC) during 2019 maintained a neutral monetary policy by leaving its overnight lending rate unchanged all year at 1.75%. By March 2020, however, Canada was engulfed by the coronavirus pandemic like the rest of the world. Canada's economy at the same time also took a hit from the plunge in oil prices caused by the Saudi-Russian price war, which resulted in devastation for Canada's important oil industry. Canadian bond prices rallied sharply on the pandemic as the Canadian economy headed for a deep recession and as the Bank of Canada cut interest rates and launched bond purchases. The Bank of Canada in March 2020 slashed its overnight lending rate by -1.50 percentage points to 0.25%.
Japan - The SGX Japan 10-year Japanese government bond (JGB) futures contract (Barchart.com symbol JX) saw some strength during summer 2019 but then fell back and closed the year little changed. The Bank of Japan (BOJ) since September 2016 has pursued a yield-curve control policy where the central bank enforces a steeper yield curve with the 10-year JGB yield near zero, potentially allowing its 80-trillion-yen per year bond-purchase program to fluctuate in size to meet its yield target. The 10-year JGB yield has therefore been trading in a narrow range near zero, within the BOJ's target boundary of +/- 0.20%. Japanese GDP growth took a sharp hit in Q4-2019 after the Japanese government raised the national sales tax to 10% from 8% effective October 1, 2019, in order to help reduce the government's massive national debt. The Japanese economy then took a much sharper hit in early 2020 with the arrival of the coronavirus pandemic. The Bank of Japan already had its policy rate at -0.10% and didn't want to cut it further into negative territory since that would further damage bank profits. However, the BOJ in March 2020 did announce an expansion of its quantitative easing program by boosting its purchases of exchange-traded funds (ETFs).
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