CME 2-year, 5-year and 10-year Swap Rate futures are designed to hedge long maturity cash market interest rate swaps while offering attractive spreading opportunities against the highly liquid CME Eurodollar futures and options contracts.

Interest rate swaps – agreements between two parties to exchange or "swap" interest rate payments – have existed for more than 20 years. During that time, they have grown from being an innovative and useful means of transferring financial risk into one of the largest financial markets in the world.

The interest rate swap yield curve serves as a benchmark for interest rates in the U.S. due to the market’s size and liquidity. The trade and volume of CME Eurodollar products has grown in tandem with the over-the-counter interest rate swap market and has become one of the most versatile hedging and trading tools available to financial professionals.

Before the advent of CME Swap Rate futures, most dealers hedged their positions by using strips of CME Eurodollar futures, or CME Eurodollar Packs and Bundles. There is a strong correlation between the interest rate swap market yield curve and CME Eurodollar strip. Thus, the presence of the CME Eurodollar strip with its 10-years of quarterly contracts provides a unique companion product to CME Swap Rate futures contract.

CME Swap Rate futures can be used to:

• Profit from a short-term directional view on interest rate swaps
• Construct hedges for individual U.S. dollar interest rate swaps or corporate debt with minimal basis risk
• Lengthen or shorten the duration of interest rate swap by selling or purchasing CME Swap Rate futures
• Create intra-product yield curve spreads via trades between the CME Eurodollar Packs and Bundles and CME Swap Rate futures
• Take advantage of yield curve and other arbitrage opportunities with cash market instruments by executing an “Exchange Basis Facility” (EBF) transaction with CME Swap Rate futures