The Chicago Board of Trade will find it difficult to attract liquidity to its new contracts in German government bond futures according to a survey of major international banks. Last week in retaliation against Eurex, CBOT announced its launch of futures on the Bund, Bobl and Schatz, hedge contracts for two-year, five-year, and 10-year bonds. Eurex, the German-Swiss began trading an equivalent suite of products on US treasuries earlier this week – an act targeting CBOT’s core business.
The global market for Bund contracts, the most liquid of all world government bonds, is lead by Eurex. And it’s doubtful that euro swap desks for the main banks – which make up the largest single bund volume – will be choosing CBOT over Eurex, said the online derivatives service TotalDerivatives. According to a report in the Financial Times, the group questioned 21 banks and brokerages as to whether or not they would switch to CBOT’s products, and only nine said, “maybe.” The other 12 answered, “no.” However, several heads of the swaps traders’ desks did believe that CBOT’s contracts could prove “worthwhile” in after-hours trading, said Ronan O’ Neill, co-author of the research, by helping to reduce bid offer spreads after the European close in the in the euro swaps market.