Created to measure the performance of long-dated U.S. Treasuries, the Dow Jones CBOT Treasury Index is composed of CBOT U.S. Treasury Bond, 10-Year Note, and Five-Year Note futures contracts. Each component makes an equal contribution to the index, as it is a duration-weighted average. The index, which will be calculated by Dow Jones Indexes, initially will be offered for licensing on April 28. The CBOT will then introduce a futures contract based on the index. The product will trade on the exchange's premier electronic trading platform, with a launch targeted for the second half of 2004.
Bernard Dan, CBOT President and CEO, said: "The CBOT recognized and addressed a need in the markets for a reliable, accurate and broad-based benchmark that allows bond market investors to measure performance. The Dow Jones CBOT Treasury index draws upon the success of the CBOT's U.S. Treasury futures products, which are the most liquid in the world, and we believe it will deliver a higher level of efficiency and transparency to the market. We are very pleased to extend our strong relationship with Dow Jones Indexes, as together we have been creating innovative products to meet the demands of customers since 1997."
Mike Petronella, President, Dow Jones Indexes/Ventures said, "Until now there has been no comparative reference point for the U.S. Treasury market. The Dow Jones CBOT Treasury index makes return comparison over time possible, and market participants will find broad uses for this unique measurement tool. We are pleased to expand our relationship with the CBOT by co-branding and calculating the Dow Jones CBOT Treasury Index."
Since U.S. Treasuries have a maturity cycle, measuring returns over time can be difficult. The index addresses this difficulty, providing U.S. Treasury market users -- such as portfolio managers, risk and hedge fund managers and investors -- with a dependable, consistent benchmark for analyzing performance, returns and portfolio strategies.
Based on actual trades of CBOT U.S. Treasury futures, the Dow Jones CBOT Treasury Index features complete transparency, which dominates and defines the exchange's liquid marketplace. The index will be disseminated to all major data vendors every 15 seconds, reflecting the most recent prices of the underlying futures contracts. Because the index is composed of real-time prices, it will produce a high, low and closing price each day, instead of a single valuation calculated at the end of the trading session. The index has a high correlation with the cash bond markets because delivery requirements for the underlying CBOT U.S. Treasury futures contracts force convergence between cash prices and futures prices.
In the latter half of 2004, the CBOT will introduce a Dow Jones CBOT Treasury Index futures contract, which will allow market participants to implement asset allocation, arbitrage and yield curve strategies. The Dow Jones CBOT Treasury Index futures contract will settle for cash and have a notional value equal to $1,000 times the underlying Dow Jones CBOT Treasury Index. For more information on the Dow Jones CBOT Treasury Index, please visit the CBOT or Dow Jones Indexes.
