Bond Futures – What is it, definition and concept | 2022

Bond futures are futures contracts whose underlying asset is fixed income instruments, in this specific case, bonds.

In other words, futures on bonds are agreements by which the sale of bonds is agreed. This, within a period and at a certain price.

We must remember that a futures contract is an agreement by which two agents agree to exchange an asset at a later fixed date. This, at a price established in advance.

The asset exchanged can be physical or financial. As far as this article is concerned, we would talk about a financial asset, since a bond falls into that category.

We must not forget that in this type of contract the participation of a clearing house is important. This is responsible for requesting and administering the necessary guarantees. In this way, the risk of non-compliance by any of the parties to the contract is avoided.

Another point to keep in mind is that, unlike a financial option, in the case of futures, the seller has the obligation, at expiration, to deliver the underlying asset to the buyer, and the buyer must pay the price. In addition, to acquire the future, the buyer pays a sum that is usually a percentage of the value of the contract.

Who wins and who loses in bond futures?

In a bond future, the buying party expects the price to rise. It is also said to have a long position.

If at the expiration of the future contract the price of the bond is higher than the agreed price, the buyer obtains a profit. You can think of it this way: The buyer can sell the bond at a higher price than he bought it for.

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On the other side, the seller of the bond is short and expects the price to fall. That is his speculation.

If, on the expiration date, for example, the price of the bond is less than the agreed price, the seller will have won. This is because he was able to sell the asset for more than he would be paid today.

And what do fluctuations in bond prices depend on? One of the most relevant factors is the interest rate. The relationship is inversely proportional. That is, if the interest rate falls, the price of the bond rises and vice versa. To understand it in detail you can visit the following note:


An example of a bond futures contract might be one with the following characteristics:

  • Underlying asset: public debt bond with an annual coupon of 5%. Maturity at 5 years.
  • Nominal value of the contract: 10,000 euros.
  • Quote: percentage of nominal.
  • Coupon expirations: March, June, September, December.

It should be noted that these are only some of the characteristics that are specified in the contract, to which are added others such as guarantees and trading hours.

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