CME Raises Margin Requirements 20% For Longest Treasury Bond Futures
September 23 2011 - 6:07PM
Dow Jones News
It will cost more to trade the longest-term U.S. Treasury
futures at CME Group Inc. (CME), an intensely volatile market since
the Federal Reserve announced Wednesday that it intends to reduce
long-term rates.
CME's clearing house announced the move in a memo distributed
late Friday, stating that the margin requirement increase is "per
normal review of market volatility to ensure adequate collateral
coverage."
The contracts, known as ultra Treasury bond futures, cover
maturities longer than 25-years.
Effective at the close of business Monday, CME's clearing house
will charge market speculators an initial fee of $6,750 per
contract, up 20% from the current cost. The initial collateral for
CME members and hedgers will also jump 20% to $5,000 per
contract.
The Fed on Wednesday launched "Operation Twist," a move aimed at
lowering long-term yields to aid the struggling economy. The
central bank will buy $400 billion in U.S. Treasurys with
maturities of between six- and 30-years, and sell an equal amount
of Treasurys with maturities of three-years or less.
The Fed's action caused the price for December ultra Treasury
bonds to leap about 10 1/2 points on Wednesday and Thursday. The
price for the same contract fell almost 2 1/2 points on Friday.
-By Howard Packowitz, Dow Jones Newswires; (312) 750-4132;
howard.packowitz@dowjones.com
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