CME to offer new bonds-based contract

The Chicago Mercantile Exchange and Lehman Brothers announced on Monday plans to create the first exchange-traded contract based on a broad bond index. The new contract will be based on Lehman’s Aggregate Index, which includes Treasury bonds, as well as government-related, corporate, mortgage-backed, asset-backed, and commercial asset-backed securities. All are dollar-denominated. The CME said that portfolio managers would be able to use the new index in the same way they use equity indices.

Some investors and analysts were not convinced that the new product would be successful. The portfolio manager for Waddell & Reed said that it would likely be popular for some mid-sized bond funds but that it would probably be too broad for other investors. Others expressed similar sentiments, with liquidity another area of concern.

Story link: CME to offer new bonds-based contract