Comparing the Fluctuations of the Price of the T – Bill Futures Contracts and Treasury Bond Futures Contracts in Relation to the Term Structure of Interest Rates. Evidence From the Danish Market

In this article, we compare the fluctuations of the price of the T - bill futures contracts and Treasury bond futures contracts in relation to the term structure of interest rates. The sample investigated is over the period 2000 to 2020. We test 50 T - bill futures contracts and 50 Treasury bond futures contracts in relation to different interest rates. We find that the term structure of interest rates of the Danish market affects the pricing of T-bills and Treasury bonds futures contracts in terms of bid and ask price. The bonds could be priced at face value, at a premium or at a discount. Zero – coupon bond are offered at a discount. When the coupon rate = market rate, then, the bond is priced at face value. When the coupon rate is less than the market rate, the bond is priced at a discount and finally when the coupon rate is bigger than the market rate the bond is priced at a premium. In addition, the interest rate risk affects the maturity, and the coupon. The price of a long-term bond will change more in terms of increasing or decreasing in value than the price of a short-term bond for a given changes in interest rates. Changes in interest rates upwards or downwards affect low versus high coupons of bonds. Changes in interest rates will affect more the low coupon bond than the high coupon bond