What is Interest Rate Futures?

Interest rate futures also called Bond Futures is a futures contract with a debt instrument that pays interest as underlying asset.  It is a contract to buy or sell a debt instrument at a specified future date at a fixed price that is determined today.


What are the underlying assets on which interest rate futures contracts available in NSE?

Currently, exchange traded Interest Rate Futures on NSE are

  1. standardized contracts based on 6 year, 10 year and 13 year Government of India Security (NBF II)
  2. standardized contracts based on 91-day Government of India Treasury Bill (91DTB). 
  3. FBIL (Board of Financial Benchmarks India Pvt Ltd) Overnight Mumbai Interbank Outright Rate (MIBOR)


MIBOR is the new benchmark rate for unsecured loans of one day duration fixed by the Board of Financial Benchmarks India Pvt Ltd (FBIL) based on the actual transactions in the inter-bank call money market.


CLICK HERE to view the Product Specification available in NSE website


What are the currently available contracts in NSE to trade?

Currently three months contracts and three quarter contracts are available at NSE to trade.


CLICK HERE to view the currently available contracts at NSE


The only contract that is actively traded currently is 717GS2028 280219.  Below is the traded details of 717GS2028 on 1st February, 2019.


Last Traded Price     -    97.09

Volume (contract)    -    85,736

Value in crores         -    1674.13

No. of Trades           -    4135


What are the benefits of trading in interest rate futures?

Benefits of interest rate futures are:

  1. It is one of the risk management tool.  It is used for hedging the interest rate risk.  Borrowers can hedge the risk in fluctuation in interest rates by taking an opposite position in interest rate futures.
  2. No securities transaction tax (STT) on trades.  Hence, transaction cost is less.
  3. At NSE single collateral pool can be used for both currency and interest rate futures


How to trade interest rate futures

Like bonds, the prices of interest rate futures contracts are inversely related to actual interest rates prevailing in the economy.  CLICK HERE to know about Bonds.  When the real interest rate goes up, bond prices will fall and when real interest rate falls, then bond prices will go up.  So,


if you expect the RBI to increase the interest rate, then go short in interest rate futures

if you expect the RBI to reduce the interest rate, then go long in interest rate futures


How much margin do I need to trade in interest rate futures?

NSE's minimum initial margin for cash settled interest rate future contract is 1.5% of the value of the contract subject to minimum of 2.8% on the first day of trading and for 91-Day T-Bill futures contracts minimum of 0.10% of the notional value of the futures contract on the first day of trading and 0.05% of the notional value of the futures contract thereafter (The notional value of the contract shall be Rs 200000) will be scaled up by look ahead period as may be specified by the Clearing Corporation from time to time.


CLICK HERE for margin calculator


How will the trades be cleared and settled? 

All open positions are cash settled on the expiry day.


What are the important points to know about interest rate futures contracts?

Segment                -    Currency

Instrument Type     -    FUTIRC / FUTIRT / ONMIBOR

Symbol                  -     717GS2028 

                                  (717 means 7.17% coupon rate, GS stands for government

                                   securities and 2028 means maturity year 2028)

Unit of Trading        -    1 lot of 2000 bonds

Contract Value        -    1 lot of 2000 bonds*Rs.100 (bond price) = Rs.200,000/-

Tick Zize                -    Rs.0.0025

Expiry Day             -    Last Thursday of every month

Trading Hours         -    Monday to Friday 9 a.m to 5 p.m


How can I trade in Interest Rate Futures with Tradeplus?

Investors enabled for currency segment can trade in interest rate futures.  Other clients can register for currency segment and start trading in interest rate futures.  It is available on NOW trading platform as well as ITS platform on all modes viz., exe., web and mobile app.


Below is “NOW” trading platform Screen shot 





Below is Infini Power EXE version screen shot

 




If you are not registered for currency segment, but want to trade in interest rate future, email Us at onlinesales@naviamarkets.com