What Are Treasury Futures? - TheStreet Definition

Dictionary of Financial Terms

Treasury futures are derivatives that track the prices of specific Treasury securities.

To go long a Treasury futures contract is to agree to take delivery of the underlying securities at the price at which you went long (adjusted for differences between various deliverable bonds). Because Treasury futures (like other futures contracts) go up and down with their underlying assets, you would go long Treasury futures for the same reason you would buy the underlying Treasuries: You expect the underlying Treasuries to go up in price. Buyers and sellers of Treasury futures don't know any more than investors in the underlying securities do about where Treasury prices and interest rates are headed.

You would not buy Treasury futures if your objective was to earn income from coupon payments. Interest rate futures do not make interest payments.

Buying and selling futures is both more efficient and riskier than buying and selling the underlying securities because it employs leverage. To buy $100,000 par amount of Treasuries, you have to lay out something close to that amount, depending on the price. But to go long a Treasury futures contract representing $100,000 par amount of Treasuries, you merely have to deposit $2,025 in a margin account, and maintain at least $1,500 in the account, as changes in the value of the contract are either added to or subtracted from it.

Definitions of Financial Terms