With the introduction of Bloomberg Credit futures, fund managers can now replicate an entire basket of investment grade corporate bonds, high yield corporate bonds, or the spread-only portion of an investment grade bond index. The primary benefit of a futures position that closely tracks a corporate bond index is simple: Futures’ inherent leverage and representative underlying indices allow them to closely replicate a cash bond position with very little upfront capital:
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Bloomberg Credit futures are based on indices that are representative of their underlying markets. Bloomberg bond indices are comprised of a robust and wide group of constituents, priced via Bloomberg Valuation Services (BVAL), and are widely used by a variety of bond market participants.
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Leverage, in the form of initial margin, is low. Only about 0.65% (DHB), 1.3% (IQB), and 1.5% (HYB) of the contract notional value needs to be posted as initial margin.[3]
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Credit futures are efficient, especially for fund companies already using U.S. Treasury futures or Equity Index futures from CME Group. Margin offsets are offered between Credit futures and other correlated products. For instance, margin credits of 75% between IQB and 10-Year U.S. Treasury Note futures, 65% between HYB and E-mini S&P 500 futures, and 65% between IQB and E-mini S&P 500 futures are available at the Exchange.
Bloomberg Credit futures now offer fund managers the ability to manage their fund liquidity precisely and efficiently. Access more details on Credit futures.
