Eurex eyes 2025 launch for EU bond futures

LONDON (Reuters) – Deutsche Boerse’s Eurex exchange is eyeing a launch for a futures contract linked to European Union bonds next year, it said on Tuesday.

The statement comes just weeks after the exchange said it still needed to see the right conditions before launching the futures, seeing confidence that the EU’s bond programme — currently temporary — would extend beyond 2026 as a key pre-requisite.

Futures contracts are derivatives through which investors buy or sell underlying securities at a future date, allowing investors to hedge their positions. They also make trading easier by boosting liquidity.

The world’s biggest bond markets, from the United States to Germany, are supported by futures markets, so the launch of an EU contract is seen as an important step as officials push for markets to treat the bloc on the same terms as a government borrower.

Backing its plans Eurex, cited the size of the EU’s borrowing programme, trading conditions comparable to the largest governments, as well as the EU’s recent move joining the exchange’s repo market for trading and clearing.

“This now (highly) developed market ecosystem, coupled with the dimensions of the underlying programmes, provide confidence that the pre-requisites for a 2025 launch of EU bond futures on Eurex are met,” its statement said.

The EU, which expects to raise over 700 billion euros ($741 billion) in common debt with the backing of member states by 2026 to finance a COVID recovery fund, has quickly become one of the biggest borrowers in global bond markets. But its status as an issuer beyond 2026 is uncertain.

Eurex’s decision comes as NYSE-parent ICE is set to launch a futures contract on an index of longer-dated EU bonds to start trading from December.

(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe)