Treasury Futures and Cheapest-to-Deliver Bonds

Written by Greg, founder of FTMarketWatch — a former licensed commodities trader.

Last reviewed: September 2, 2026

Some Treasury futures can be satisfied by delivering one of several eligible Treasury securities. The cheapest-to-deliver (CTD) security is generally the eligible bond or note that is economically most advantageous for the short futures position to deliver after taking the contract's conversion-factor rules into account.

Why is there a delivery basket?

Fixed-income futures are designed around standardized contract rules, while the cash Treasury market contains many individual securities with different coupons and maturities. A delivery basket allows a contract to reference a range of eligible securities rather than one exact bond.

What does the conversion factor do?

The exchange uses conversion factors to adjust for differences among deliverable securities. The CTD calculation therefore is not simply “the bond with the lowest market price.” Traders compare the economics of buying a candidate security and delivering it into the futures contract.

Why CTD can change

Interest rates, yield-curve changes, financing costs and relative cash-bond prices can change which security is cheapest to deliver. That makes CTD analysis important when pricing Treasury futures and basis trades.

Related concept: basis

The futures/cash relationship is often discussed through the basis. Professional fixed-income traders may compare the futures price, conversion factor, financing costs and cash price of deliverable bonds.