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A junior analyst working at a derivatives desk with substantial trading volume has been given the responsibility of monitoring the bond markets and managing the delivery process for US Treasury bond futures contracts. The analyst needs to explore how changes in market conditions impact the identification of the cheapest-to-deliver bonds and understand how these changes affect the pricing of futures contracts. Which of the following statements would the analyst find to be correct?
A
As bond yields increase, short maturity bonds with low coupons will tend to be the cheapest-to-deliver.
B
The embedded options associated with delivery against a US Treasury futures contract tend to increase the value of the contract.
C
The 'wild card play' benefits owners of long positions in expiring futures contracts by allowing them to determine when counterparties holding short positions will deliver.
D
A downward-sloping yield curve makes it more likely that short-maturity bonds will be cheapest-to-deliver.