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BSE to introduce 6-year government bond futures from Dec 30

Leading stock exchange BSE will introduce new interest rate futures (IRF) contracts from December 30 on 6-year government bonds maturing in 2022.

The IRF contract is based on 6.84% central government security maturing on December 19, 2022, and will be available for trading from December 30 this year, BSE said in a circular.

An IRF contract is an agreement to buy or sell a debt instrument at a specified future date at a pre-determined price.

The cash-settled IRFs provide market participants an 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.

The IRF market gets participation from retail investors, trading houses, foreign portfolio investors (FPIs) and other institutions.

Last week, the National Stock Exchange (NSE) had announced that IRF contracts based on 6.84% central government security having maturity on December 19, 2022, will be available for trading with effect from December 30 this year.

The exchange, earlier this year, had introduced IRF contracts on government bonds maturing in May 2030.