<h2>Article Summary</h2>
· Over the past 10 years since its launch, the Ultra 10-Year U.S. Treasury Futures Contract has become a major benchmark contract for interest rate products.
· The Ultra 10-Year Contract was immediately adopted by the market in its first week of trading, with its daily trading volume and open interest reaching approximately 700,000 contracts and 2.6 million contracts, respectively.
This year marks one of the most successful cases in the history of innovation in the futures market: a significant milestone for the Ultra 10-Year U.S. Treasury Futures Contract.
Looking back to early 2016 when the Chicago Mercantile Exchange (CME) launched this product, the financial landscape was vastly different from today. Ten years ago, the market was still digesting the Federal Reserve's (Fed) decision to raise interest rates from zero for the first time since the 2008 financial crisis. The benchmark interest rate at the beginning of 2016 was only 0.25%—a stark contrast to today's target range of 3.50% to 3.75%.
However, for a market accustomed to a zero-interest-rate environment, even a mere 0.25% was a shock. As a result, significant volatility occurred in the first few weeks of 2016: amid concerns over a slowing Chinese economy and collapsing oil prices, the S&amp;P 500 experienced one of its worst starts to the year in history.
In this economic uncertainty, the CME took action to mitigate key market risks: specifically, hedging the 10-year interest rate curve. The 10-year is often referred to as the &#34;center of gravity&#34; in the global fixed income market and is widely used for pricing and hedging the two major non-sovereign debt markets: U.S. mortgages and corporate bonds.
Before the launch of the Ultra 10-Year U.S. Treasury Futures, hedgers typically relied on the &#34;classic&#34; 10-Year U.S. Treasury Futures (TY). This contract had a very broad deliverable basket: it accepted any Treasury note with a remaining maturity between 6.5 and 10 years. With the introduction of the Ultra 10-Year (Ultra10), hedgers now have the ability to obtain precise risk exposure for the critical 10-year maturity.
The Ultra10 has stricter delivery rules, allowing only original issue 10-year notes with a remaining maturity of at least 9 years and 5 months, which enables the contract to track the true 10-year yield more closely.
The launch of the Ultra10 filled a significant gap in the U.S. Treasury yield curve, and the market response was extremely enthusiastic. New futures contracts typically take years to establish liquidity, but the Ultra 10-Year Contract took off rapidly within just a few days. Just four days after its launch, the trading volume surpassed 60,000 contracts, while open interest reached 20,000 contracts, making it the most successful interest rate product launch at the CME in the past decade.
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The initial surge in trading volume for the Ultra 10-Year U.S. Treasury Futures was driven by a few enthusiastic early adopters. The mortgage and corporate bond trading departments capitalized on the precise hedging opportunities offered by this new contract, as it closely tracks one of their key risk points
Government bond basis traders are also pleased to see this futures product that closely matches the &#34;on-the-run&#34; 10-year cash notes. This tight relationship allows basis traders to more accurately hedge the arbitrage between the cash and futures markets for government bonds.
Unlike some predictions of &#34;eroding&#34; the existing &#34;classic&#34; 10-year contracts, the Ultra10 has instead facilitated significant relative value trades between the two contracts, thereby boosting the trading volume of both. Relative value traders utilize the &#34;TY/TN spread&#34; between the classic and ultra futures to express their views on the slope of the yield curve between 7-year and 10-year maturities.
By the end of 2016, the Ultra10 had established itself as a liquidity benchmark with a deep order book, and this contract has continued to grow since then. Currently, the Ultra10's average daily trading volume consistently exceeds 700,000 contracts, making it the fourth most actively traded contract in the U.S. Treasury yield curve.
The market primarily trades through screens (electronic platforms), but its depth allows large asset management companies to execute substantial block trades without significantly impacting prices. Today, a decade after its launch, the Ultra10 U.S. Treasury futures are regarded as a major benchmark contract for interest rate products.
The Ultra10 futures contract has many achievements worth celebrating on its 10th anniversary, but as the contract moves into its next phase, there remain abundant growth opportunities ahead. The increasing issuance of government bonds continues to drive hedging demand and provide relative value trading opportunities, while the 10-year point remains a cornerstone of the U.S. financial system.
Meanwhile, benefiting from the deep liquidity of the underlying futures contract, the Ultra10 U.S. Treasury options market has also shown strong signs of growth. As the market seeks more innovative and sophisticated risk management methods in a dynamic interest rate environment, the growth of Ultra10 options proves that this &#34;perfect 10 years&#34; story still has ample room for development

MMKT

The Super 10-Year U.S. Treasury Futures contract launched by the CME has become a major benchmark contract for interest rate products, with daily trading volume reaching approximately 700,000 contracts and open interest around 2.6 million contracts. Since its introduction in 2016, this contract has played an important role in market volatility, helping to reduce key market risks. Compared to traditional 10-Year U.S. Treasury futures, the Super 10-Year contract offers a more precise risk exposure, making it an important tool in the global fixed income market

How Super 10-Year U.S. Treasury Futures Became the Benchmark for Government Bonds