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Can Government Bond Futures Stand Up to LIBOR? November 7, 2002 FIA Chicago

Can Government Bond Futures Stand Up to LIBOR? November 7, 2002 FIA Chicago. Randolf Roth, Head of Market Development and Strategy US. SCHATZ (2 year) . BOBL (5 year). BUND (10 year). Strong growth of Eurex fixed income futures. Contracts. Average Daily Volume per Year. 800,000. 700,000.

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Can Government Bond Futures Stand Up to LIBOR? November 7, 2002 FIA Chicago

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  1. Can Government Bond Futures Stand Up to LIBOR?November 7, 2002FIA Chicago Randolf Roth, Head of Market Development and Strategy US

  2. SCHATZ (2 year) BOBL (5 year) BUND (10 year) Strong growth of Eurex fixed income futures Contracts Average Daily Volume per Year 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 1997 1998 1999 2000 2001 2002 FIA Chicago 2002, Panel on Interest Rate Futures

  3. SCHATZ (2 year) BOBL (5 year) BUND (10 year) Bund future most actively traded interest rate contract worldwide Q3 2002 Contracts Average Daily Volume per Quarter Euribor (LIFFE) * FIA Chicago 2002, Panel on Interest Rate Futures

  4. Why would market share shift from Bund to Euribor? • Two factors have to be separated • Yield curve effects • Change in benchmark status • Yield curve effects were at times the driving force in the last 18 months • Also seen on Eurex • Reasons: • Exceptionally high short-term interest rate volatility • Shift in Economic activity • We do not see a shift in benchmark status • German government bond futures define the risk free rate in Europe • Increasing government debt • Liquidity risk much more significant than basis risk FIA Chicago 2002, Panel on Interest Rate Futures

  5. 100% Euro-Schatz 80% 19 16 24 26 33 10 23 27 12 12 28 15 28 34 27 Euro-Bobl 24 25 28 60% 40% 41 48 47 54 51 48 52 61 46 Euro-Bund 20% 0% 1.Qrt 2.Qrt 3.Qrt 1.Qrt 2.Qrt 3.Qrt 1.Qrt 2.Qrt 3.Qrt 2000 2001 2002 Volume comparison of Eurex Capital Market Products: Q1 -3, 2000 to 2002 (Volume breakdown) FIA Chicago 2002, Panel on Interest Rate Futures

  6. Promising Outlook for volume growth of 10, 5 and 2 year interest rate futures • Eurex capital market contracts are the benchmark for European fixed income markets and are widely used for risk management of Non-European bonds • Increasing issuance activity in the European government bond markets • Current outstanding debt €2.8 trillion • Future harmonization of the European government bond market • Electronic futures trading will continue to support efficient and growing markets FIA Chicago 2002, Panel on Interest Rate Futures

  7. Attachment FIA Chicago 2002, Panel on Interest Rate Futures

  8. Preiskorrelation Swapnote® -/Bond-Futures und Swapsätze • Geringfügig höhere Korrelation zwischen Swapnote-Future und Swapsätzen im Beobachtungszeitraum • Der Vorteil des geringeren Basisrisikos der Swapnote-Kontrakte ist minimal und kann das Liquiditätsrisiko nicht kompensieren • Keine Notwendigkeit für Swaphändler Kontrakte zu unterstützen FIA Chicago 2002, Panel on Interest Rate Futures

  9. +13% +41% +23% +16% Development of Interest Rate Products Jan. - Sept. 2001 / Jan. - Sept. 2002 FIA Chicago 2002, Panel on Interest Rate Futures

  10. 34% 40% 21% 21% 598 600 532 493 440 414 400 185% 132 296 253 56 155% 90 189 18% 200 282 35 240 6% 164 154 0 Euronext. Liffe Eurex CBOT CME Volume Comparison Electronically vs. Floor Traded Contracts: Jan. - Sept. 2001 / Jan. - Sept. 2002 Electronic Floor mn. contracts FIA Chicago 2002, Panel on Interest Rate Futures *Euronext Volumen Januar-September 2002 beinhaltet Matif/Monep, Belfox und AEX

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