Rhody Trader

An interesting headline came across the wire this morning. The CME group has announced that it will be raising the minimum trading increment for Treasury Bond futures to 1/32. This caught me a little by surprise because I thought 32nds were the standard increments, but then I remembered from back in my fixed income analyst days that fractional ticks had come in to play.

Here’s the text of the Reuters release.

    July 1 (Reuters) – CME Group Inc <CME.O>: * Announces increase in minimum tick size for 30-year U.S. Treasury bond  futures * Says plans to increase minimum trading increment for U.S. Treasury bond  futures to 1/32nd effective August 30 * Says change will be applied to all expiration months * Says minimum trading increments for futures intermonth and intercommodity spreads as well as options will be unchanged

It’s interesting that in a time when spreads and increments have actually been generally on a downward path to see something like this in such a high profile futures contract. I told our head bond market guy about that. His theory was that since liquidity in the long end has dried up a bit that the dealers probably requested the change to better serve their market-making purposes.

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