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The German 10-year Bund futures contract traded on the Eurex futures and options exchange in Frankfurt became the world's most actively traded derivative product by the end of 1999. In this article, we provide a detailed exploration of the interday and intraday return volatility in the Bund futures contract using a sample of five-min returns from 1997 to 1998. The evolution of interday volatility is described best by a MA(1)-fractionally integrated process that allows for the long-memory features. At the intraday level, we find that macroeconomic announcements from both Germany and the U.S. are an important source of volatility. Among the various German announcements, we identify the IFO industry survey of business climate, industrial production (preliminary), and Bundesbank policy meeting as being by far the most important. The three most significant U.S. announcements include the employment report, the National Association of Purchasing Managers (NAPM) survey, and employment costs. Overall, U.S. macroeconomic announcements have a far greater impact on the Bund futures market than their German counterparts. (c) 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:679-696, 2002
INTRODUCTION
The German government bond and futures markets are relatively new additions to the global financial industry and present many opportunities to traders and investors alike due to their size and turnover. In particular, the 10-year Bund futures contract, which is the .agship instrument on the Frankfurt-based Eurex futures and options exchange, recently seized the title of the most actively traded derivative in the world. The Bund futures contract overtook the equivalent U.S. instrument-the 10-year Treasury bond futures contract. On an average day, dealers turned over nearly 700,000 Bund contracts. Occasionally, the recorded volume was in excess of 1,000,000 contracts. Moreover, the Eurex exceeded the Chicago Board of Trade(CBOT) in terms of total volume of contracts traded by the end of 1999.1
Despite its importance as the benchmark derivative for the Eurozone and the huge and growing turnover, there is little research on various aspects of the Bund futures contract. In particular, the literature is silent on its intradaily and interday volatility patterns. If private information is the driving force behind the volatility in equity markets, public information in the form of macroeconomic news has a more important role in motivating volatility for .xed income securities and their...