CHICAGO - CME Group, the world's leading derivatives marketplace, has announced the introduction of new credit futures set to begin trading on June 17, 2024, subject to regulatory approval.
These futures contracts will be the first to offer market participants the ability to manage duration risk in conjunction with U.S. Treasury futures through an intercommodity spread. Additionally, they will provide a novel way for investors to manage credit component risk via futures on Bloomberg's duration-hedged index.
The forthcoming credit futures will be based on the Bloomberg U.S. Corporate Index, which tracks the performance of investment grade corporate bonds, and the Bloomberg U.S. High Yield Very Liquid Index, which represents a liquid segment of the high yield corporate bond market.
This move is expected to enhance the efficiency of fixed income markets by offering a capital-efficient tool for investors to manage exposure and risks associated with their bond portfolios.
Agha Mirza, CME Group Global Head of Rates and OTC Products, highlighted the positive market response to the announcement of the credit futures earlier this year. He noted that these contracts are designed for efficiency and will support spread trading with automatic margin offsets against CME Group's (NASDAQ:CME) Interest Rate and Equity Index futures.
Umesh Gajria, Global Head of Index Linked Products at Bloomberg Index Services Limited, expressed support for the launch, indicating that it aligns with the progression of fixed income markets.
The new U.S. Corporate Bond Index futures will be available for trading on CME Globex and will be eligible for clearing via CME ClearPort. They will be listed with, and subject to, the rules and regulations of CME.
CME Group's expansion into credit futures is part of its broader offerings, which enable clients to trade across various asset classes, including futures, options, cash, and over-the-counter markets. The company operates major platforms such as CME Globex and CME ClearPort and is known for its central counterparty clearing services.
This announcement is based on a press release statement from CME Group.
InvestingPro Insights
As CME Group gears up to launch its innovative credit futures, the company's financial health and market performance are key indicators of its ability to support and sustain new product offerings. Currently, CME Group boasts a robust market capitalization of $77.58 billion, underscoring its significant presence in the financial markets. With a price-to-earnings (P/E) ratio of 24.36, the company trades at a premium, which reflects investor confidence in its future earnings potential. However, this high P/E ratio also suggests that the stock might be trading at a high valuation relative to near-term earnings growth, an important consideration for potential investors.
The company has also demonstrated a strong commitment to shareholder returns, having raised its dividend for 5 consecutive years and maintained dividend payments for 22 consecutive years. This track record is a testament to CME Group's financial stability and consistent performance. Moreover, with a dividend yield of 4.57%, the company stands out as an attractive option for income-seeking investors. The InvestingPro platform offers additional insights into CME Group's financial metrics and investment potential, including PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a total of 7 InvestingPro Tips that could further guide investment decisions.
Investors tracking the company's stock price will note that it is trading near its 52-week high, at 96.28% of this peak value, which may indicate market optimism about the company's prospects. Such performance, coupled with the fact that analysts predict profitability for the current year and that the company has been profitable over the last twelve months, paints a picture of a firm with a strong financial foundation as it embarks on the introduction of new credit futures.
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