New Interest Rate Futures of 6-year and 13-year government bonds to be launched and available for trading on NSE and BSE exchanges from July 31,2015 onwards.
In simple words,Interest rate futures is a future contract with an underlying instrument that pays interest . Interest Rate Futures (IRFs) is a contract between a buyer and a seller for future delivery of an interest-bearing security such as government bonds. In general Interest rate futures use the inverse relationship between interest rates and bonds to hedge against the risk of rising interest rates due to reserve bank policy ,imbalance in supply-demand chain and the type of loans.
History of Interest Rate Futures
It should be noted that NSE, BSE, MCX-SX started offering 10 Year IRF Futures from Jan 2014 onwards
The newly announced 6-year contract is based on 8.27% central government security having maturity on June 09,2010 and 13-year government bond is based on 7.88% having maturity on March 19,2030. Both the bonds have a contract cycle of three serial monthly contracts followed by three quarterly contracts as March/June/September/December which can be traded from Monday to Friday 9 AM to 5 PM.
Mutual Funds, FIIs, banks and primary dealers, speculators,corporate investors and individuals can participate in Interest rate futures market. Recently in May 2015 10-year government bond having maturity on 2025 had been announced and traded on the exchanges.
|Contract specification for IRF contract on 6-year security||Contract specification for IRF contract on 13-year security|
|Symbol||827GS2020 – futures contracts based on 8.27%||788GS2030 – futures contracts based on 7.88%|
|Expiry Date||Last thursday of the month||Last thursday of the month|
|Market Type||Normal market ‘N’||Normal market ‘N’|
|Permitted Lot size||Rs. 2 Lakhs face value of GOI securities equivalent to 2000 units||Rs. 2 Lakhs face value of GOI securities equivalent to 2000 units|
|Contract value||Quoted price * 2000||Quoted price * 2000|
|Base Price||Theoretical price on the first day of the contract,on all other days daily settlement price of the contract||Theoretical price on the first day of the contract,on all other days daily settlement price of the contract|
|Normal Trading Hours||Monday to Friday 9:00AM to 5:00PM||Monday to Friday 9:00AM to 5:00PM|