What are Treasury Futures? A Beginner’s Guide

Treasury futures (also called interest rate futures) are standardized contracts that track the future value of U.S. government debt like bonds and notes. These futures are among the most widely traded in the world and serve as critical tools for managing interest rate exposure, hedging portfolios, and speculating on economic policy.

In this guide, we’ll cover:

• What Treasury futures are and how they work

• Why traders and institutions use them

• The most popular Treasury contracts

• Benefits and risks of trading interest rate futures

• How to get started with Treasury futures on MetroTrade

What Are Treasury Futures?

Treasury futures are contracts that let you speculate on or hedge against future changes in U.S. government bond yields and prices. When you buy or sell a Treasury future, you’re trading the expected value of a government security — such as a 10-year note or 30-year bond — at a future date.

Key takeaway: Treasury futures provide a way to manage exposure to U.S. interest rates and bond prices without holding the actual securities.

How Do Treasury Futures Work?

Treasury prices and interest rates move in opposite directions:

• When interest rates go up, bond prices go down

• When interest rates go down, bond prices go up

If you think interest rates will fall, you’d buy a Treasury future. If you think rates will rise, you’d sell.

Treasury futures are priced off the implied value of a specific government security. These contracts are cash-settled and traded on exchanges like the CME. Like other futures, they include:

• Contract size: Usually tied to a $100,000 notional amount

• Tick size: The minimum price movement

• Tick value: Dollar value of each price move

• Expiration dates: Typically quarterly (March, June, September, December)

Why Trade Treasury Futures?

Hedge Interest Rate Risk

Banks, institutions, and fixed income investors use Treasury futures to hedge portfolios against rate changes.

Speculate on Monetary Policy

Traders use Treasury futures to express views on inflation, rate hikes, economic growth, or central bank policy.

Manage Duration Exposure

If your portfolio is sensitive to rising or falling interest rates, Treasury futures help you fine-tune your exposure.

Capital Efficiency

Futures allow you to control large Treasury-equivalent positions with relatively low capital requirements.

Popular Treasury Futures Contracts

Here’s a breakdown of key interest rate futures contracts available on MetroTrade:

Note: Most of these contracts trade nearly 24 hours a day, from Sunday 6 PM to Friday 5 PM (EST).

How Treasury Futures Are Used

Speculation

Active traders use Treasury futures to speculate on:

• Fed rate decisions

• Inflation trends

• Economic slowdowns or surprises

• Inversions in the yield curve

For example, if you believe the Federal Reserve will cut rates, you might buy /ZN (10-Year Treasury Futures) expecting bond prices to rise.

Hedging

Institutions and portfolio managers use Treasury futures to manage interest rate exposure. Use cases include:

• Bond portfolio hedging: Offset losses in bond prices when rates rise

• Mortgage hedge: Protect against refinancing risk

• Corporate treasury hedging: Lock in future borrowing costs

Understanding the Tick System

Treasury futures don’t quote in decimals like stocks. Instead, they use a fractional tick system based on 32nds.

For example:

• A price of 123’16 = 123 and 16/32 = 123.50

• A move from 123’16 to 123’17 = 1 tick = $31.25 for a /ZB contract

Mini and micro contracts follow the same format but with smaller tick values (e.g., $3.125 or $1.5625).

Key Benefits of Treasury Futures

High Liquidity: Contracts like /ZB and /ZN trade with enormous volume, making it easy to enter or exit trades with minimal slippage.

Capital Efficiency: Futures allow you to take directional positions on interest rates without tying up capital in physical bonds.

Diversification: Treasury contracts often move independently of equities, providing a potential hedge or risk-off exposure.

Macro Trading Utility: These contracts are closely tied to macroeconomic conditions, ideal for trading based on economic data releases and Fed policy.

Risks of Treasury Futures

Leverage Risk: Futures use margin, which can magnify both profits and losses.

Rate Sensitivity: Futures can move sharply in response to economic data or policy announcements.

Tick Complexity: The pricing structure (e.g., 1/32s) can be confusing for beginners. Always understand tick values before trading.

Expiration and Rollover Risk: If you want to maintain a long-term position, you’ll need to roll it into the next contract month before expiration.

Micro and Ultra Treasury Contracts

For smaller traders or those seeking more precision, CME offers micro and ultra contracts:

• /MWN and /MTN: Micro versions of the 30-year and 10-year

• Ultra contracts: Target specific bond maturities not covered by standard contracts

These give you more control over trade size, exposure, and margin requirements.

How To Start Trading Treasury Futures

1. Open a MetroTrade account
   No minimum deposit required to access Treasury markets.

2. Choose your product
   Start with a liquid benchmark like /ZN (10-Year Note Futures) or /ZF (5-Year Note Futures).

3. Understand the tick size and contract mechanics
   Review contract specs carefully, including tick size, tick value, and expiration cycle.

4. Use a demo account
   Practice interpreting quote formats and test risk management before going live.

5. Stay updated on economic events
   Treasury futures are extremely sensitive to news like Fed meetings, CPI, and jobs reports.

Final Thoughts

Treasury futures are essential tools for navigating interest rate risk, whether you’re an active trader, long-term investor, or business managing debt exposure. With deep liquidity, built-in leverage, and round-the-clock access, these contracts allow you to trade one of the world’s most important markets with precision.

Start with smaller contracts, learn the tick system, and trade with discipline.

Ready to trade Treasury futures?
Explore Contracts on MetroTrade

Or try them risk-free with our Demo Trading Account

Frequently Asked Questions