Euro Bund Future

The Euro-Bund-Future ( federal government bond liability , hence the abbreviation FGBL ) is a futures contract that relates to a fictitious, long-term federal bond with a coupon of 6 percent and a term of 10 years.

Subject of the contract

A Euro-Bund-Future refers to a fictitious bond of the Federal Republic of Germany with a coupon of 6 percent and a remaining term of 10 years on the delivery date of the future. The nominal value of a contract is 100,000 euros.

On the delivery day, the seller is obliged to deliver bonds with the nominal value of the contract. He can choose from government bonds with a remaining term of at least 8.5 years and a maximum of 10.5 years. The bonds must have a minimum issue volume of 5 billion euros.

The buyer is obliged to pay the tender price . This is calculated from the nominal value of the contract, multiplied by the conversion factor (see below) of the tendered bonds, plus the accrued interest since the last interest date - or minus the negative accrued interest up to the next interest date.

The conversion factor is a value that is determined for each actually existing bond, through which a delivery obligation from the sale of a futures contract can be fulfilled, and which specifies the price at which the bond would have to be quoted on the delivery date in order to achieve the same return as the the notional bond underlying the Euro-Bund-Future (namely 6%). Therefore, bonds with a coupon of less than 6% have a conversion factor <1 and bonds with a coupon of more than 6% have a conversion factor> 1.

Term, close of trading

On the Eurex - exchanges are contracts for the next three quarters are available. The longest term is therefore just under nine months. Delivery months are the quarterly months of March, June, September and December. The futures can be traded until 12:30 p.m., two trading days before the respective delivery date.

Fulfillment, delivery

The delivery day is the tenth calendar day of the respective quarterly month , provided that this day is a trading day, otherwise the next subsequent trading day. The bonds that can be used to settle a futures contract on the Euro Bund Future, as well as their conversion factors, are determined by Eurex Clearing AG and are available to the exchange participants on a screen. The conversion factor adjusts the price of the bonds possible for delivery to the price of the contract at the close of trading. The bonds suitable for fulfillment must have a non-cancellable remaining term of 8.5 to 10.5 years at the time of delivery.

Deliveries are made between the Clearing Members and Eurex Clearing AG. The execution of deliveries to non-clearing members and own customers is the responsibility of the responsible clearing member; the execution of deliveries by the Non-Clearing Members to their customers is then the responsibility of the Non-Clearing Members. Exchange participants are only allowed to redeliver debt securities assigned to their customer position account or indicated for delivery by their customer.

Course history

See also: Risks of Interest-bearing Securities

Since the Bund future is a fictitious standard bond, its price is subject to the usual risks . It is mainly driven by the expected interest rate level :

The price of the Bund future rises when lower interest rates are expected.
The other way around , it falls in anticipation of rising interest rates.

Thus, a seller of the Bund future speculates on rising interest rates. Such a development can usually be expected in the following situations:

inflation
Rise in interest rates
Increased federal capital requirements
Tightening the economic
Shortage of capital by the central banks .

On the evening of April 15, 2015, the price of the Euro-Bund-Future exceeded the mark of 160 points for the first time. A price above 160 means that the notional bond has a negative return .

Web links

Individual evidence

↑ German bonds: Interest for ten-year-olds falls below 0.1 percent for the first time. In: Frankfurter Allgemeine Zeitung . April 16, 2015, accessed January 23, 2016 .
↑ Euro Bund Future: At 160 it ends - theoretically. In: Börse am Sonntag . March 30, 2015, accessed January 3, 2020 .
^ Matthias von Arnim: Bund Future: Bunds on diving trip. The fun stops at 160 points. In: Handelsblatt . April 14, 2015, accessed January 23, 2016 .

[1] German bonds: Interest for ten-year-olds falls below 0.1 percent for the first time. In: Frankfurter Allgemeine Zeitung . April 16, 2015, accessed January 23, 2016 .

[2] Euro Bund Future: At 160 it ends - theoretically. In: Börse am Sonntag . March 30, 2015, accessed January 3, 2020 .

[3] Matthias von Arnim: Bund Future: Bunds on diving trip. The fun stops at 160 points. In: Handelsblatt . April 14, 2015, accessed January 23, 2016 .