No Change in the Current Design of German Interest-Rate Futures at Eurex

On Thursday May 27, the derivatives market Eurex, in collaboration with the Working Committee on Interest Rates, came to the conclusion that the current design of the German interest-rate futures would not be changed. Eurex is again counteracting speculations that there could be another so-called squeeze in the deliverable bonds in June. Eurex reported that intensive dialogue with the working committee members had shown that, as far as they could tell, there was still no indication of such a squeeze. In the opinion of Eurex and working committee members, conspicuous movements in the market, especially before a settlement date, have nothing to do with the design of the interest rate futures, but are attributable to the specific characteristics of the repo and cash market. At its meeting on May 27, the internationally oriented Working Committee on Interest Rates at Eurex comprising participants from the largest financial centers in the world again saw no reason to change the BUND future contract specifications nor those of any other German interest-rate futures. In the past few weeks, the various means of reducing the risk of a potential squeeze in the market had been discussed, but in the Working Committee's judgement, this had not proved necessary. Three-fourths of the working committee's members were against a lower coupon, one of the suggestions that had been made. An expansion of the delivery basket was also categorically rejected, since the market in any event is currently oriented to the delivery of German federal bonds, and not government bonds of other countries. The market participants were in favor of the suggested further improvement in the publication of the daily open interest figures. Eurex will also carry out further analyses on the possibility of extending the delivery date into a delivery period.