An agreement to buy or sell a bond at a certain date at a certain price. That is, Investor A may make a contract with Investor B in which A agrees to buy a certain number of B's bonds at 90% of their par value on January 15. This contract must be honored whether the price of the bonds goes to 80% or 125% of par. As with all futures contracts, bond futures contracts can help reduce volatility in certain markets, but they contain the risks inherent to all speculative investing. These contracts may be sold on the secondary market, but the person holding the contract at its end must take delivery of the underlying asset.
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