The 6% notional coupon for Treasury futures, set by the CME in 2000, is now a critical factor. As 30-year yields approach this level for the first time since its introduction, all deliverable bonds become similarly priced after conversion factor adjustment, significantly increasing the probability of a cheapest-to-deliver (CTD) switch.
Unlike other Eurex futures using a 6% notional coupon, the Buxel contract's unique 4% coupon makes it highly sensitive as German yields approach this level. Despite a large delivery option value, the Buxel future appears 8-10 cents cheap versus fair value, presenting a potential trading opportunity, albeit one requiring caution in the current volatile market.
A switch in the cheapest-to-deliver (CTD) bond for Eurex Buxel futures could cause a massive 35% change in the contract's DV01 (a measure of interest rate risk). This presents a significant hedging risk for investors who are not dynamically managing their exposure, as the duration gap between the current and competing CTD bonds is exceptionally large.