Top stock exchanges NSE and BSE will launch a new 10-year bond futures contracts offering 6.97 per cent yield on government security from Tuesday.
The new interest rate futures (IRF) contract will mature on September 6, 2026, BSE and the NSE said in two separate circulars today.
An IRF is a contract between a buyer and a seller agreeing to the future delivery of any interest-bearing assets such as government bonds. Banks, primary dealers, mutual funds, insurers, FIIs, corporates and brokers, as well as retail investors trade in this product.
"Interest Rates Futures contracts based on 6.97 per cent Central Government Security having maturity on September 6, 2026 will be made available for trading with effect from Tuesday, September 6, 2016," the bourses said.
The cash-settled IRFs provides market participants with a better option to hedge risks arising from fluctuations in interest rates, which depend on various factors including RBI policy, demand for liquidity and flow of overseas funds.
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