All bond futures have a range of deliverable bonds which underlie the futures contract, giving the seller the choice as to which one he delivers to meet his contractual obligations. The deliverable bond that generates for the seller the greatest profit or the least loss on a bond futures position is the cheapest to deliver, and can be identified by calculating the returns from a cash and carry arbitrage on each of the deliverable bonds. The bond which gives the greatest arbitrage profit, or the least arbitrage loss, is the cheapest to deliver.

A technique used to decide which debt instrument is most profitable to deliver against a futures contract.

Usually refers to the selection of bonds deliverable against an expiring bond futures contract.

A method to determine which particular cash debt instrument is most profitable to deliver against a futures contract.

The cash security that provides the lowest cost (largest profit) to the arbitrage trader. The futures price tracks the CTD instrument.