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(The Ultrabond future is a bet on the price of 30-year US treasury bonds, which are dollar denominated.)

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For a futures position with typical margin, the risk is almost entirely interest rate risk. This is because the interest rate risk is leveraged but the forex risk is not (another way to look at it: the leverage is achieved by effectively borrowing in USD). If the bond futures price in USD is unchanged but USD declines 1% relative to EUR, the investor has lost 1% on whatever margin deposit was made. On the other hand, if the bond futures price in USD declines 1%, the investor has lost much more than 1% on the margin deposit (approximately 20% loss on minimum margin).

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  • Great answer - a simple example showing exact calculations of both scenarios with an assumed rate of leverage could improve it even further. – Grade 'Eh' Bacon Nov 10 at 15:51

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