Shorting US Treasuries

Overview: 

Interactive Brokers clients have the ability to gain direct exposure to US Treasuries on both the short and long side of the market.

 

Order Entry

Orders can be entered via TWS or through IBKR’s Bond Desk.

 

Cost to Borrow

The borrow fee to short US Treasuries is based on IBKR’s borrow cost and is subject to daily change. If the Treasury is borrowed by Interactive Brokers at the General Collateral rate, the customer does not incur a borrow fee.

 

Interest Income

Customers earn Short Credit Interest on their short US Treasury positions based on IBKR’s standard tiered rates.

 

Margin Requirements

Margin1 requirements on Short US Treasury positions are the same as Long US Treasury positions. The requirement is between 1% and 9%, depending on time to maturity. The proceeds of the short sale are not available for withdrawal. The amount available for withdrawal is generally Equity with Loan Value – Initial Margin.

Additional information on fixed income margin requirements can be found here.

 

Commissions

Selling short US Treasuries incurs the same commission cost as buying US Treasuries. IBKR’s commission schedule can be found here.
 

Trading Policy

Minimum short position size is $10M face value per CUSIP due to limitations of the US Treasury borrow market. Once the minimum position size is met, the minimum order increment is $1M for both short sales and buy to covers (as long as the resulting short position remains higher than the $10M face value minimum).

Short Sale Order Examples

Existing US Treasury Short Position Face Value in Account (per CUSIP) Face Value of Short Sale Order Face Value of Resulting Position Order Accepted? Reason
Flat $10,000,000 $10,000,000 Yes Face Value of Resulting position is => $10M
Flat $5,000,000 $5,000,000 No Face Value of Resulting position is < $10M
$10,000,000 $900,000 $10,900,000 No Order increment < $1M
$10,000,000 $1,000,000 $11,000,000 Yes Order increment => $1M

Buy-to-cover orders that will result in a short US Treasury position of less than $10M face value will not be accepted.

Buy to Cover Order Examples

Existing US Treasury Short Position Face Value in Account (per CUSIP) Face Value of Buy to Cover Order Face Value of Resulting Position Order Accepted? Reason
$15,000,000 $5,000,000 $10,000,000 Yes Face Value of resulting position is => $10M
$15,000,000 $6,000,000 $9,000,000 No Face Value of resulting position is < $10M
$15,000,000 $15,000,000 Flat Yes Order increment => $1M

 

Payment in Lieu

When a short US Treasury position is held over the record date of an interest payment, the borrower’s account will be debited a payment-in-lieu of interest equal to the interest payment owed to the lender.

 

Eligible US Treasuries for Shorting

US Treasuries with an outstanding value greater than $14 Billion can be sold short.

US TIPs, STRIPs, TF (Floating Rate Notes) and WITFs (When-Issued Floating Rate Notes) are not available for shorting. Non-US sovereign debt is also not available for shorting.

 

1Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment.
For more information regarding margin loan rates, see ibkr.com/interest