What are 10-year U.S. Treasury Note Futures?
10-year U.S. Treasury note futures are a financial instrument based on the future value of U.S. government-issued 10-year Treasury notes. Treasury bond notes are a U.S. debt security issued at regular intervals, have an initial maturity date 10 years into the future, and pay a fixed interest rate return.
There is an inverse relationship between the price movement of bonds and interest rates: when interest rates are expected to rise, prices will generally move lower; when interest rates are expected to fall, prices will generally move higher.
Why Trade 10-Year U.S. Treasury Note Futures?
Tracking and monitoring 10-year U.S. Treasury notes can be crucial for understanding key market sentiment and expectations regarding economic growth, inflation, and central bank policy. Additional benefits of trading 10-year U.S. Treasury note futures include:
Direct exposure to speculate on the price movement of 10-year notes and the interest rate yield
Increased flexibility versus purchasing bonds directly
Go long or short based on real-time price movement of 10-year notes
Nearly 24-hour access to highly liquid, cost-effective trading
Trade Micro Treasury Yield Futures to Reduce Financial Commitment
Micro yield futures serve as a cost-effective starting point to trade interest rate yield for bonds and notes. At 1/10th the size of standard contracts, Micro futures are more accessible for traders of all levels, allowing for more precision to fine-tune trade size and reduced margins. Other advantages of trading these smaller contracts include:
- Highly leveraged markets for more buying power*
- Start with a smaller account vs. full-size Treasury yield contracts
- Increased flexibility for better position management
Micro Treasury yield futures contracts provide an ideal entry point for new futures traders to start small and scale up as you become more comfortable in the live markets.
*Leverage also increases the risk associated with futures trading and only risk capital should be used for trading
Who Trades 10-Year U.S. Treasury Note Futures?
10-year U.S. Treasury note futures traders can be broken down into three main groups:
- Commercial traders typically trade 10-year Treasury note futures to hedge interest rate exposure. For example, large banks that hold a portfolio of mortgages or commercial loans can mitigate their risk to interest rates changes and may take delivery of the actual 10-year notes.
- Large professional traders are typically commodity pool operators, proprietary trading firms, institutional investors, and hedge funds. These traders are purely speculating on the price movement of 10-year Treasury note futures and generally do not take delivery. Normally, commercial traders and large speculators make up 90% or more of the daily trading volume in 10-year note futures.
- Self-directed retail traders make up the remaining daily trading volume in 10-year U.S. Treasury note futures. Like large professional traders, they are typically speculating only on the price movement of the futures contract.
What Can Affect the price of 10-year u.s. treasury note futures?
Interest rates are the most significant factor in determining the price direction of 10-year U.S. Treasury note futures. Additional drivers that can affect interest rates include:
Inflation Expectations
When investors expect higher inflation, the yield on the 10-year note may increase to compensate for less purchasing power. Similarly, higher yields mean lower note prices.
Federal Reserve Policy
Changes in U.S. monetary policy—like changes to the federal funds rate—can significantly impact expectations for interest rates moving forward.
Domestic Economic Data
Weekly and monthly reports on GDP growth, unemployment, manufacturing output, and other key economic indicators can influence interest rate sentiment.
It is also important to keep an eye on 10-year U.S. Treasury note auctions. Each auction is announced by the U.S. Treasury Department and details the amount of debt to be issued. Large financial institutions then bid based on the yield they are willing to accept. If demand for new 10-year notes is weaker than expected, 10-year note futures may decline in price. For more information, visit Treasury Direct.
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Risks of Trading 10-Year U.S. Treasury Note Futures
The primary risk of trading 10-year U.S. Treasury note futures is that the price will go against the trader’s position. Having a risk management plan that includes stop losses or a trailing stop, along with appropriate trade sizing, can help reduce your financial exposure.
Tips to keep in mind especially for newer futures traders include:
- Practice in a futures trading simulator that reflects live market conditions until you prove to yourself that you're comfortable with the market swings. When you start trading with real dollars, trade small to start, and work your way up.
- Build a well-defined futures trading plan that includes clear entry and exit criteria, analysis of market conditions, and a schedule for when you are and are not going to trade.
10-Year U.S. Treasury Note Futures Contracts Specifications
10-year U.S. Treasury note futures are standardized exchange-traded contracts that represent the value of a $100,000 Treasury note. The value for a full 1-point move in the contract is $1,000.
You can trade 10-year U.S. Treasury note futures on the 24-hour electronic CME Globex system. Treasury 10-year note contracts are deliverable according to the contract specifications.
| Standard 10-year U.S. Treasury Note Futures | |
|---|---|
| Symbol | ZN |
Exchange | CME Globex (CBOT) |
| Contract point value | $100,000 in U.S dollars |
| Price quote | Points and fractions of points with a basis of 100 points |
| Minimum price fluctuation | 1/2 of 1/32 of one point (0.015625 * 100,000 / 100) = $15.625 per contract per-minimum move) |
| Trading hours | Sunday 6:00 pm ET to Friday 5:00 pm ET |
| Listed contracts | Quarterly contracts (Mar., Jun., Sept., Dec.) listed for three consecutive quarters |
| First notice date^ | Two trading days after last trading day of the expiring contract |
| Expiration style | Trading terminates at 1:01 pm ET, seven business days prior to the last business day of the contract month |
| Settlement | Deliverable |
| Additional Specifications | View all from CME Group |
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