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JGB Futures

The most important future for JGB's is the 10-year futures with a contract specification of 6%. Main bucket point on the interest rate the future covers is the 7-year JGB rate. Due to liquity problems and the absence of arbitrageurs during the financial crisis the correlation to the 10-year JGB cash bond was relatively low and diminished the possibility to use the the future as an instrument to hedge. Therefore the Tokyo Stock exchange tried to bring in more liquidity by introducing a mini-future also on the 10-year tenor in the second quarter of 2009. Besides that the foreign financial institutes have to come back into this market to make it more arbitrage free and have the theoretical price close to the realized price. It seems that the Tokyo Stock exchange with it structure as a cooperative is to slow to adjust to needs and also to much underfunded to support necessary changes like easy access and trading tools (not to mention the marketing of the JGB Futures as a benchmark). The 10-year JGB future also trades at LIFFE/Euronext but it seems not in hugh volumes.

The future markets for bonds will gain momentum and volume, because there will be a JPY Future bond index out from the beginning of September 2009 and esp. insurance company in Japan will use this index. The index will be provided by S&P and sponsored by GS for the first year.

Futures trading for EUR/YEN and interest rates (but not the 10-year futures contract) is on the Tokyo Finance Exchange (soon to be merged with the commodities exchange in Japan).


 In order to follow the market price of the JGB future pls have a look on the following link: