Because the seller chooses which bond to deliver, the futures price moves with the price of the CTD. Rates in Japan have stayed below 6%, the coupon of the notional bond of 10-year JGB Futures, and among the deliverable bonds, bonds with 7 years remaining have been the CTD for a long period (as of 2021)1. When the CTD is estimated before the delivery date, it is usually defined as the bond with the smallest net basis, which deducts the carry (interest received up to the delivery date minus the funding cost)1.

Notes

  1. Japan Exchange Group (Takahiro Hattori), "国債先物入門" (Introduction to JGB futures), 2021 (in Japanese). ↩ ↩2