Analysis On The Mechanism And Identification Of Squeeze Risk In Treasury Bond Futures

In recent years,CICC has launched the five year treasury bond futures and ten year treasury bond futures gradually,which is of great significance to improve China's financial market system.However,the function of treasury bond futures should be established on the basis of the healthy operation of treasury bond futures market.If the bond futures market squeeze risk2 occurs frequently,not only the bond futures function cannot work well,but affects the effectiveness of the underlying asset market prices.It's not conducive to the formation and improvement of yield curve.This paper discusses the mechanism and identification method of Treasury futures' squeeze risk by taking the delivery mechanism of treasury bond futures in China.This paper argues that if the cost of delivery difference between the cheapest deliverable bonds(CTD)and the second cheapest deliverable bonds(SCTD)is large,the substitution of the CTD and SCTD is poor.The shortage of CTD is likely to lead to squeeze risk in bond futures contract.And the deviation(DF)between the market price and theoretical price of deliverable bond is used to judge whether the Treasury futures has the squeeze risk.If the DF before delivery is larger than the DF after delivery,it means that the Treasury futures has the squeeze risk.According to the mechanism and identification method of Treasury futures' squeeze risk,this paper identifies the squeeze risk of ten year Treasury futures contracts combining with the actual situation of the relevant market in China.The article finds that although there is no obvious squeeze risk in the ten year treasury bond futures in general,there are the obvious squeeze risk in T1612 contract,T1609 contract,T1606 contract,T1603 contract and T1512 contract.According to the empirical results,this paper puts forward some policy suggestions,including improving the liquidity of treasury bonds,increasing the delivery time and setting up cross market regulatory agencies.The research results not only have important value for the supervision department monitoring the price anomalies of bond futures related market timely and making corresponding countermeasures,is of great significance to develop the spot market and the repo market,play the interest rate risk management function and pricing efficiency.