Treasury Futures Basis Explained: Cash References, CTD, and Delivery
Learn how Treasury futures basis relates a named delivery-eligible cash security to a futures contract month, why conversion factors and carry matter, and what gross and net basis do not prove.
Direct answer
For a named physically delivered Treasury note or bond futures contract, delivery month, and eligible cash security, CME describes gross basis as the security's clean cash price minus the futures price multiplied by that security's conversion factor. This is a normalized, time-specific price relationship. It is not a generic futures-minus-spot formula, an automatic cheapest-to-deliver result, a guaranteed convergence trade, or a rule for cash-settled Micro and Yield futures.
Basis begins with a contract month and an eligible cash security
“Treasury basis” only becomes specific after you name the physically delivered futures product, its delivery month, and one eligible cash Treasury security. The cash side needs a security identifier, clean-price field, timestamp, and settlement convention. The futures side needs the exact product, month, price field, timestamp, and the conversion factor assigned to that same security for that delivery month.
One maturity word does not supply those fields. A cash Treasury is an issued security, while a futures contract has a delivery basket and a dated final process. Treasury futures versus cash Treasuries sets out why they should not be treated as one record merely because both are called “10-year Treasury.”
Several securities can be eligible for one contract month. Each can have a different conversion factor and therefore a different calculated basis. A statement about “the basis” should say which security, field, and time it uses.
Gross basis aligns clean cash price with a converted futures price
CME's Treasury-basis material defines gross basis for a named eligible security as clean cash price minus the futures price multiplied by the security's conversion factor. Write the comparison in consistent price units first; if a data display uses points and 32nds, convert the verified quote convention before combining it with a decimal-price record.
The conversion factor is product-, delivery-month-, and security-specific. It allows a futures price to be compared with an eligible security under the contract's delivery design. It does not make the futures value a direct cash price for every bond, nor does it erase the need to identify the cash-price field. How to read Treasury futures price quotes explains why a futures display needs a product, quote convention, price field, and time before it enters a calculation.
Gross basis is a descriptive relationship at a stated time. Use it to organize records, not to turn one unlabeled price difference into an executable trading claim.
Carry and the prospective delivery date create a second layer
The cash security settles on its stated cash-market convention, while futures delivery is prospective. CME distinguishes gross basis from net-basis or basis-on-carry views that account for assumptions such as coupon accrual, financing or repo treatment, and time to delivery. Those assumptions need their own rates, dates, methods, and sources.
That is why two people can report different figures for the same named security without either number being a simple arithmetic error: they may be using gross versus net basis, different carry inputs, different delivery dates, different cash-price fields, or values observed at different times. Preserve the formula name alongside every figure.
Do not infer a risk-free profit from a positive or negative basis. Real-world execution, financing, liquidity, delivery options, time, taxes, account rules, and the possibility of changing inputs belong outside a one-number screen.
CTD and delivery choices can shift the relationship
The cheapest-to-deliver concept is related to basis analysis, but a conversion factor or one gross-basis observation does not choose CTD by itself. Eligible securities can differ in coupon, maturity, clean price, accrued interest, financing, and delivery economics. The relevant relationship can change as market inputs or time to delivery change.
Cheapest-to-deliver Treasury futures explains why CTD is a contract- and month-specific delivery comparison rather than a permanent label for a bond. The invoice record adds another boundary: Treasury futures delivery invoice amount shows how converted futures price and accrued interest enter a delivery calculation for the actual security delivered.
The delivery process can include choices and timing specified by the contract. For a basis comparison, label the security and assumptions you are studying; do not write as if every eligible security necessarily will be delivered or as if a public CTD screen determines an individual account outcome.
Use a time-stamped basis record instead of a standalone signal
A reusable basis record contains the futures product and month, cash security identifier, conversion factor, clean cash price and settlement convention, futures price field, timestamps, source, formula label, and any carry, financing, accrued-interest, or delivery-date assumptions. This makes a calculation inspectable and prevents a new price from being compared with an old conversion factor or a different cash record.
The framework in this guide belongs to physically delivered Treasury note or bond futures. It should not be carried unchanged into cash-settled Micro Treasury futures, Yield futures, a constant-maturity Treasury rate, or an arbitrary generic “10-year yield.” Treasury futures price versus yield is a useful reminder that similar maturity labels can refer to different reference records.
This guide explains a market-structure relationship. It is not a recommendation to buy a Treasury, sell or buy a future, finance a position, take delivery, or pursue an arbitrage. Current exchange rules, market data, financing terms, and account conditions govern an actual transaction.
Common questions
Is Treasury futures basis just cash price minus futures price?
No. For the physically delivered Treasury framework described here, gross basis uses a named eligible security's clean price minus futures price times that security's conversion factor. The exact contract month and price fields matter.
What is the difference between gross basis and net basis?
Gross basis is the normalized clean-price relationship. Net-basis or basis-on-carry views add stated assumptions such as financing, coupon accrual, and time to delivery. Keep the formula name and inputs with the result.
Can one Treasury futures contract have more than one basis value?
Yes. A delivery basket can contain several eligible securities. Each has its own cash price and conversion factor, so each can have a separate calculated basis at a given time.
Does the lowest basis identify the cheapest-to-deliver security?
Do not assume that. CTD analysis requires the relevant delivery economics and current inputs, including factors beyond one gross-basis observation. Use the exact product, month, security, pricing fields, timing, and assumptions.
Does this basis formula apply to Micro Treasury or Yield futures?
Not automatically. This guide describes physically delivered Treasury note and bond futures with eligible cash securities and conversion factors. Cash-settled products use their own reference and final-settlement designs.