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CME’s Ultra Bond Future Best Among New Rate Products, CEO Says

CME Group Inc.’s Ultra Treasury bond future contract is the best new interest-rate product the company has created, Chief Executive Officer Craig Donohue said.

“The long-bond contract, which was just launched in January, is actually the most successful futures contract we have ever launched” based on open interest and average daily volume in its first three to four weeks, Donohue said in an interview today.

The CME Group contract comes as the U.S. Treasury seeks to increase the average maturity of its debt to six to seven years, from about 4.42 years. This means increased sales of longer-term securities as the government seeks to fund a record $1.4 trillion budget deficit.

Donohue was responding to a question whether the exchange can create new products to rival its success with futures based on interest rates and equity indexes pioneered in the 1980s. New contracts covering crude oil, natural gas, Eurodollars and smaller-sized futures on equity indexes such as the Standard & Poor’s 500 were developed during that decade, Donohue said.

The long-bond success “gets missed because of the wave of revolution that occurred in the 1980s,” he said.

CME Group’s Chicago Board of Trade subsidiary held 54,254 open contracts on the ultra bond as of yesterday with 9,083 of the futures changing hands, according to Bloomberg data. The contract began trading on Jan. 11.

The ultra bond contract, which designates Treasuries with maturities of 25 years or more for delivery, doesn’t replace the exchange’s 30-year bond future, which allows delivery of government bonds that mature in 15 years or more.

The 30-year bond was the benchmark Treasury issue until it was suspended and replaced by the 10-year note in 2001. The Treasury reintroduced the so-called long bond in 2006.

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