Bond Futures

Bond futures are standardised exchange-traded derivative contracts that obligate the buyer to purchase, and the seller to deliver, a specified government bond at a predetermined price on a specified future delivery date. Bond futures allow participants to take leveraged positions on the direction of interest rates — buying bond futures when expecting rates to fall (prices rise) and selling when expecting rates to rise (prices fall). In India, NSE offers interest rate futures on 91-day Treasury Bills and government securities with maturities of 2 years, 5 years, and 10 years — the 10-year government bond futures being the most actively traded. Primary market participants in Indian bond futures include banks, primary dealers, mutual funds, and insurance companies who use them to hedge their large fixed income portfolios against adverse interest rate movements. Speculators and macro traders use bond futures to express directional views on RBI monetary policy — a single contract controls notional exposure of ₹2 lakh for T-Bill futures and ₹2 lakh for G-Sec futures. Bond futures are cash-settled in India, meaning no actual bond delivery occurs at expiry — positions are settled at the RBI reference yield for the underlying instrument on the expiry date.