Born(e) in the US(A)

Research evidence excerpt

Born(e) in the US(A)

Ipek Ozil AC (1-212) 834-2305 Emre Alptuna (1-212) 270-4843 Global Markets Strategy J P M O R G A Nipek.ozil@jpmorgan.com emre.alptuna@jpmorgan.com

J.P. Morgan Securities LLC J.P. Morgan Securities LLC 30 July 2026

Chris Hayward (1-212) 622-6152

chris.hayward@jpmchase.com

J.P. Morgan Securities LLC

• The delivery option in longer-dated bond futures contracts has become topical after the

twist steepening post-yesterday’s FOMC

• Should the yield curve continue to steepen, CTDs in both the USZ6 and WNZ6 contracts

could shift, causing duration changes and rebalancing needs

• We like buying the USZ6 factor-weighted basis to get put-like asymmetric exposure to

a further selloff in the long end

Following the FOMC meeting yesterday, UST yields increased in the long end as the curve

twisted flatter. One of the consequences of this development has been that the delivery

option in the longer-dated contracts (especially the US contract) has become topical, and the

prospect of a shift in the cheapest-to-deliver (CTD) bond has drawn some interest from

market participants. For the December bond futures contract (USZ6), bonds ranging from

the 2.375% Feb 2042 to the 1.875% Nov 2051 are eligible for delivery, with the 4.875% Aug

2045 currently being the CTD (as of 7/29). For the ultra-long futures contract (WNZ6),

bonds ranging from the WI Nov 2056 to the 2.25% Feb 2051 are eligible for delivery, with

the 4% Nov 2052 being the CTD (as of 7/29). The US contract, however, has a few bonds

that appear to be equicheap and could be CTD in the event of small shifts in the curve.

We also want to reiterate another important point regarding UST futures. We begin by noting

that futures prices are determined not by the prices of bonds in the basket but rather by bond