CME Raises Margin Requirements 20% For Longest Treasury Bond Futures

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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