In what proved to be an exquisite piece of timing, more reminiscent of the golden days of the exchange-traded derivatives industry, Chicago's two leading markets last week announced plans to launch futures and options on US government agency debt. Both the Chicago Board of Trade and the Chicago Mercantile Exchange last week said they will offer futures and options on five and 10-year bonds issued by Fannie Mae and Freddie Mac, the US mortgage lenders.

The announcement followed the news that the US government expects to repay the Federal debt by 2013 after the US Treasury posted its largest budget surplus since the 1950s. Both Fannie Mae and Freddie Mac are vying to establish their securities as a viable alternative to US treasuries amid fears that the shrinking government market could struggle to meet demand from OTC derivatives players.