Economy, Business And Markets

Bond Futures to Boost Liquidity

Bond Futures to Boost Liquidity
Bond Futures to Boost Liquidity

Bond futures are instruments to provide more liquidity and reduce risks in the capital market, said a brokerage firm at stock exchange.

The bond futures not only provide more liquidity, but they also create an opportunity for those who are pessimistic about the market, Mohamad Beheshtian told SENA.

“A shareholder, for instance, buys bonds in cash but he predicts the market would plunge. He can then sell the bonds as a future contract. On the due date, he will make his profit even if the market plunges,” said Beheshtian, the manager of Khebregan Sahaam brokerage.

The bond futures first became tradable three years ago but they were not welcome due to some software problems, lack of necessary infrastructures, and low volume and value of transactions. When the bond futures transactions are low either in volume or value, the seller and buyer may not match and this will create obstacle to liquidity.

A bond future is a contractual obligation for the contract holder to purchase or sell a bond on a specified date at a predetermined price. A bond future can be bought in a futures exchange market and the prices and dates are determined at the time the future is purchased.