Dow Jones CBOT Treasury Index SM
The Dow Jones CBOT Treasury Index is a real-time benchmark of default-free U.S. capital
market returns that offers bond market professionals an accurate, transparent, broad-
based indicator of market performance. The index allows competing portfolio strategies,
returns volatility and intra-day execution to be evaluated clearly and consistently.
The Dow Jones CBOT Treasury Index accurately and
efficiently replicates the performance of U.S. Treasury
bond market, the key driver of the fixed-income markets.
It is weighted by the modified duration of CBOT 30-year
T-bond, 10-year T-note, and 5-year T-note futures contracts.
Its calculation thus produces an unbiased measure of
market performance. No single maturity dominates. Each
component’s contribution to index valuation is consistent
with its position along the risk-reward curve.
Because the index components remain constant, returns
over time are comparable and easy to calculate. The
index thus provides a benchmark for assessing both the
consistency and the quality of portfolio risk and returns.
Moreover, the performance of the index is highly correlated
with the cash bond markets because delivery requirements
of the underlying futures contracts force price convergence.
Measuring What You Manage
Who Uses the Dow Jones CBOT Two variables matter for benchmarking trade execution quality
—price and time. Taken separately, they are meaningless;
Treasury Index? together they are an invaluable tool. Because the index reflects
Among the many users of the Dow Jones CBOT Treasury Index actual market transactions and is updated every 15 seconds,
are professional portfolio managers, risk managers, hedge fund it captures the price/time market dynamic in a single index
managers and anyone else who invests in the bond market, number that can be used for execution benchmarking, analyzing
whether directly or indirectly through mutual funds and other transaction costs and running scenario analyses.
money management services.
Key Benefits Potential Uses
REAL TIME BENCHMARKING
Index values are calculated and disseminated continuously Investors and portfolio managers can measure the returns
and in real time—every 15 seconds or whenever a component against the returns generated by the index.
trades, whichever comes first. High, low and closing prices are
Investors and portfolio managers can use the index in
TRANSPARENCY combination with other indexes (e.g. the Dow Jones Industrial
Index pricing is transparent, as it is based on easily Average) to analyze performance of various and competing
observable CBOT futures transactions. asset classes.
ACCURACY STRATEGY EVALUATION
Index valuation is both accurate and reliable, because it is Portfolio strategies including passive management, active
based on actual transactions rather than quotes, estimates or management, market timing and yield curve trading can be
traders’ closing marks-to-market. benchmarked against index performance.
SIMPLICITY PORTFOLIO DECOMPOSITION
The index methodology is simple and easy to replicate. The Investors and portfolio managers can use the index to separately
index consists of just three components: CBOT 5-year T-bond measure the money market portion of returns of a given portfolio
futures contracts, CBOT 10-year T-bond futures contracts and apart from the capital market portion of a given portfolio.
CBOT 30-year T-bond futures contracts.
EXECUTION QUALITY TRACKING
BROAD-BASED Money managers can assess execution quality by tracking
The three index components define the U.S. Treasury yield cash market executions against intraday index prices.
curve—which can be used as a basis for all other fixed
When bond portfolios are transferred to new managers,
opportunity costs can be measured and execution quality
assessed using the index as the benchmark.
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All information as of June 2010.
© CME Group Index Services LLC 2011. All rights reserved.
The Dow Jones CBOT Treasury Index is a joint product of Dow Jones Indexes, a licensed trademark of CME Group Index Services LLC (“CME Indexes”), and the Board of Trade of the
City of Chicago, Inc. “Dow Jones®”, “Dow Jones Indexes” and “Dow Jones CBOT Treasury Index” are service marks of Dow Jones Trademark Holdings, LLC (“Dow Jones”), and have
been licensed for use by CME Indexes. “CBOT” is a service mark of The Board of Trade of the City of Chicago, Inc. The Dow Jones CBOT Treasury Index is owned by the CBOT and
calculated and distributed by CME Indexes.
Investment products based on Dow Jones CBOT Treasury IndexSM are not sponsored, endorsed, sold or promoted by Dow Jones, any of its affiliates, or CME Indexes, and none of Dow
Jones, any of its affiliates, or CME Indexes make any representation regarding the advisability of investing in such products. All information in these materials is provided “as is”. CME
Indexes, Dow Jones, CBOT and their respective affiliates do not make any representation regarding the accuracy or completeness of these materials, the content of which may change
without notice, and each of CME Indexes, Dow Jones, CBOT and their respective affiliates disclaim liability related to these materials.