ASX-Bloomberg fixed income futures poised to transform Australia’s fixed income market: report

A Bloomberg Indices report published on Saturday analysed how the new futures tied to the Bloomberg AusBond Composite 0+ Year Index (BACM0) and the Bloomberg AusBond Credit 0+ Year Index (BACR0), can act as efficient hedging tools for Australia’s fixed income markets.

ASX announced in February that it has plans to collaborate with Bloomberg Indices to introduce new interest rate futures to track the Australian fixed income markets.

The expanding Australian bond market

The Australian bond market now exceeds A$2 trillion (£1.058 trillion) in size and accounts for over 10% of the world’s AAA-rated sovereign bond universe, acting as a major alternative for foreign issuers who typically use US or Euro markets.

The Reserve Bank of Australia (RBA) pointed out that the market has deepened through larger onshore issuance, more active repo usage, a broader investor base and stronger participation from offshore buyers.

This expansion has created demand for more sophisticated listed derivatives that closely align with the benchmarks investors already use to manage fixed-income exposure, according to the report.

ASX reported that its interest rate futures volume increased 15.82% year-on-year to 16.2 million lots last month, as compared to 14 million contracts in May 2025.

The exchange saw futures on its 90-day bank bills increase 22.72% to 5.4 million lots trading last month, versus 4.43 million contracts the same time last year. The 3-year bond futures saw trading volume increase 10.52% 5.6 million lots in May, as against 5.1 million contracts the same time last year. The 10-year bond futures saw trading volume rise 20% to 5 million lots, as against 4.2 million contracts the same time last year.

Two benchmarks, two risk exposures

At the center of the new futures offering are two distinct bond market benchmarks that allow investors to separate broad market exposure from pure credit risk.

BACM0 serves as Australia's primary investment-grade bond benchmark. The index includes Australian government bonds, semi-government securities, corporate debt and supranational issuers.

By contrast,BACR0 focuses specifically on investment-grade credit exposure.

ETF growth creates foundation for futures trading

In the report, Bloomberg argued that a key factor supporting the launch of the new futures is the rapid growth of Australian fixed-income exchange-traded funds (ETFs), many of which already track the same Bloomberg benchmarks.

The iShares Core Composite Bond ETF (IAF) and Vanguard Australian Fixed Interest Index ETF (VAF) are benchmarked to BACM0, while the iShares Core Corporate Bond ETF (ICOR) and Vanguard Australian Corporate Fixed Interest Index ETF (VACF) track BACR0.

Together, those four ETFs held approximately A$8.4 billion (£4.44 billion) in assets under management at the end of March 2026 and generated around A$462 million (£244.1 million) in on-exchange trading volume during the month.

Futures designed for institutional use

Bloomberg said that the new futures are important because they place the widely used domestic bond benchmarks for derivatives trading. It said that there are far fewer standardised tools that map directly to the broad domestic benchmark and its credit sleeve.

The report concluded that the upcoming contracts address that gap by creating listed instruments for the same indices many investors already use to measure their portfolios.

The new futures will be cash-settled and have quarterly expiries, similar in contract design to ASX’s treasury bond futures.

“ASX offers deep, globally accessible futures liquidity that provides a strong foundation for the next phase of fixed income development,” said Nita Kong, rates product manager, ASX.

“Extending our futures product mix to the AusBond Composite and Credit Indices is a natural next step as fixed income exposure becomes increasingly managed around these established benchmarks. The Bloomberg AusBond index futures expand and diversify the mature ASX fixed income toolkit, offering participants an efficient and capital-effective way to manage both interest rate and credit risk.”

The expected launch of the new futures come after the exchange appointed senior Euronext executive Anthony Attia as its new managing director and chief executive last month.