TREASURY BOND FUTURES (ZB, ZN, ZF)
Plain English
US Treasury futures let you trade government bond prices. When interest rates go up, bond prices go down — and vice versa. These are the most actively traded futures in the world by institutional investors. Understanding them helps you understand the bond market's impact on everything else.
Going deeper
US Treasury futures track US government bond prices. Major contracts: T-Bond (ZB) — 30-year bonds, $100,000 face value; T-Note (ZN) — 10-year notes, $100,000 face value; 5-Year Note (ZF) — $100,000 face value; 2-Year Note (ZT) — $200,000 face value. Bond price and yield move inversely — if you expect rates to fall, buy bond futures (prices rise). Key drivers: Fed policy decisions, inflation data (CPI, PCE), employment data (NFP), and global risk sentiment. Treasury futures are used for duration hedging (banks, insurance companies), yield curve trades (buying short-dated vs. short-selling long-dated), and macro directional bets on monetary policy.
Examples
Rate Cut Trade
The economy weakens and the Fed signals rate cuts. You buy ZN (10-year T-Note futures). As yields fall from 4.5% to 3.5% (rates down = prices up), ZN rallies. Each full point = $1,000. A 3-point rally on 5 contracts = $15,000 profit.
Yield Curve Steepener
You expect the economy to recover (which typically steepens the yield curve — long rates rise more than short rates). Trade: sell ZB (30-year) and buy ZN (10-year). If the long end of the curve rises more than the short end, the spread profit.