CME wants to lure retail traders to the bond market by offering a simplified futures contract that tracks yields

• CME Group Inc is introducing four simplified futures contracts that track bond yields.
• The Micro Treasury Yield futures will rise when Treasury yields increase and fall when they decline.
• It's a move from CME, whose customers are typically investment professionals, to capitalize on the boom in retail investing.
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CME Group Inc is attempting to lure retail traders by offering a simplified futures contract that tracks yields. The Micro Treasury Yield futures will rise when Treasury yields increase and fall when they decline.

The contracts will begin trading on Aug. 16 and will come in 2-,5-,10-, and 30-year versions.

It's a move from CME, whose customers are typically investment professionals, to capitalize on the boom in retail investing. The futures track a simpler metric, rising and falling with yields, rather than looking at the inverse movements of yield and price which can be confusing to those with little experience with fixed income.

The new investment product comes as interest rates remain low while debt in the US balloons. Over the last year, the US budget deficit reached a record $1.9 trillion from October 2020 to April 2021, CME said. At the same time, average daily volume in CME's US Treasury futures and options grew over 30% year-over-year, which the firm says is a sign of increased hedging and trading activity.

"Our new, smaller yield-based futures are designed for market participants of all sizes who want to gain exposure to, or more precisely hedge against, U.S. Treasury auction issuance," said Sean Tully, CME global head of financial and OTC products. "These new contracts will complement our existing suite of U.S. Treasury futures and options, and further demonstrate the value of offering cash and futures markets side-by-side."

Micro 2-Year, Micro 5-Year, Micro 10-Year, and Micro 30-Year Yield futures will be sized at $10 per basis point of yield, and will be cash settled to newly created BrokerTec cash U.S. Treasury benchmarks.