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A derivatives desk trades a large volume of US Treasury bond futures contracts. A junior analyst at the desk is asked to monitor the bond markets and the process of delivering a bond against an expiring futures contract. The analyst studies how changes in market conditions determine which bonds are more likely to be the cheapest-to-deliver and how the process of delivery impacts the futures price. Which of the following observations will 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.