<p>Bond futures are financial derivatives that allow investors to speculate on or hedge against the price movements of bond markets. They are contracts that agree to buy or sell a bond at a predetermined price and date in the future.</p>

<h2>How It Works</h2>
<p>Bond futures are traded on exchanges, with the most common being the 10-year U.S. Treasury note futures traded on the Chicago Board of Trade. Here's how they work:</p>
<ul>
  <li><strong>Contract Specifications</strong>: Each contract has a specific face value (e.g., $100,000 for the 10-year U.S. Treasury note), maturity date, and coupon rate.</li>
  <li><strong>Price Quotation</strong>: Bond futures are quoted as a percentage of their face value, with movements of 0.01% representing a $25 change in the contract's value.</li>
  <li><strong>Mark-to-Market</strong>: Bond futures are marked to market daily, meaning that any gains or losses are settled at the end of each trading day.</li>
  <li><strong>Delivery</strong>: At expiration, the seller must deliver a bond that meets the contract's specifications to the buyer, or they can cash settle the contract.</li>
</ul>

<h2>Why It Matters</h2>
<p>Bond futures serve two primary purposes: speculation and hedging. For example, a bond portfolio manager expecting interest rates to rise can use bond futures to hedge their portfolio. By shorting bond futures, they can offset potential losses in their bond holdings due to falling bond prices. Conversely, investors expecting interest rates to fall can use bond futures to speculate on rising bond prices.</p>