The Korea Exchange (KRX) announced on Feb. 6 that it will open the “30-Year Treasury Futures Market” from Feb. 19 to promote the advancement of the government bond market and hedge against risks from long-term interest rate fluctuations. This marks the first time in 16 years since the introduction of 10-year treasury-bond futures in 2008.
The reason the exchange opened the 30-year treasury futures market is due to the increase in issuance and trading of long-term government bonds, which has led to demand for trading in
exchange-traded derivatives based on them. The proportion of 30-year government bonds among the issuance of long-term government bonds accounts for approximately 76 percent.
Additionally, one of the reasons for the market opening is the increased importance of hedging against long-term government bond yield risks for market participants due to the interest rate fluctuations resulting from the global monetary policy easing and tightening measures following the COVID-19 pandemic.
After the Ministry of Economy and Finance announced the introduction of 30-year government bond futures in October 2022, a simulated market has been operating since Jan. 17. The simulated market will run until Feb. 16. On Jan. 18, market makers were selected, including Kyobo Securities, Meritz Securities, Shinhan Securities, Kiwoom Securities, HI Investment & Securities, and Hanyang Securities.
The exchange anticipated that the 30-year government bond futures would be actively utilized as a means to hedge against long-term government bond interest rate fluctuations for insurance and pension funds, as well as for hedging forward contracts of government bonds for securities firms and banks. Moreover, it forecasted that the growth of the spot and futures markets through arbitrage trading would accelerate, leading to improvements in price discovery functionality.
In addition, the exchange expected an increase in the influx of new investors seeking to establish futures positions at low cost, as well as professional investors employing various investment strategies such as trading global government bond futures.