BOBL Futures Contract

What is a BOBL Futures Contract?

A BOBL futures contract is a normalized futures contract in light of a basket of medium-term debt issued by the German Federal Government.

BOBL is an abbreviation for a German term, Bundesobligation, which meant English is federal government bond.

Understanding the BOBL Futures Contract

BOBL futures contracts trade under the symbol FGBM on the Eurex Exchange, an international exchange based close to Frankfurt.

The underlying assets are medium-term bonds with maturities of 4.5 to 5.5 years and a coupon rate at present at 6%. The contract has a notional contract value of 100,000 euros with a base pricing unit of \u20ac1 and a base tick value of \u20ac5. Not at all like most different types of future contracts, BOBL contracts will generally be settled by delivery.

The Eurex Exchange bargains essentially in European-based derivatives. It is the biggest European futures and options market. Prices are quoted in 0.01 percent of par value and contracts mature quarterly in March, June, September, and December.

In the U.S., these futures contracts trade on the Intercontinental Exchange (ICE) under the symbol G05.

The iShares Germany Govt Bond UCITS ETF (SDEU) is a exchange-traded fund (ETF) in view of German notes and bonds.

The German Fixed Income Market

As in the U.S. market, fixed income futures in view of German government debt instruments are traded actively for short-, medium-, and long-term maturities.

The BOBL is the medium-term maturity, however there additionally is active trading for Bund futures. These are the long-term bond equivalent to the U.S. Treasury bond, with original maturities somewhere in the range of 10 and 30 years.

Schatz futures are short-term maturity bonds, having an underlying basket of short-term German debt with maturities going from 21 to 27 months. Schatz is otherwise called the short bund futures contract.

BOBL futures, along with the Bund and Schatz, are among the most vigorously traded fixed-income securities in the world.

The BOBL depends on the medium-term security. The Bund is the long-term security and the Schatz is the short-term security.

Interest rates in Germany are closely watched. Spreads between comparative maturities in Germany, the remainder of Europe, and the U.S. are frequently compared to examine relative global economic conditions, flows of capital, and government economic policies.

The benchmark 10-year yields and two-year yields are many times used to compare conditions between countries.

Soon after the 2008 financial crisis, central banks around the world set out on a planned campaign to increase liquidity to revive economic growth. This campaign brought about numerous government interest rates, remembering some for Germany, falling below zero. During this period, German interest rates fell below zero for bond maturities up to seven years.

Features

• German bonds are among the most vigorously traded fixed-income securities in the world.
• A BOBL futures contract is a normalized futures contract in light of medium-term bonds issued by the German government.
• Comparisons between yields for German bonds and those of different governments, including the U.S., are frequently used to assess relative economic performance.