Interest Rate Futures

Fed Fund Futures

Fed Fund Futures

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Fed funds futures are contracts that are express the general market consensus of where the daily official fed funds rate will be at the time of contract expiration. The Fed funds rate is the overnight lending rate for banks that is set by the federal reserve. Fed funds futures contracts are cash settled contracts traded on the CME with the settlement date occurring on the last business day of each month. Fed funds futures are often used by banks and portfolio managers with the goal of hedging against inflation in a short-term market.

Fed Fund Futures History

The history of the Fed funds rate has often been a great indicator to health and history of our nation’s economy. For instance, rates steadily rose from 2004-2006 until it hit a head at 5.25% and remained there for a year until 2007. When the financial crisis of 2007 and 2008 hit, the fed lowered the rate to 0%-.25% where it remained for quite some time. The Fed rate again began to rise in 2018 and 2019 and hit a high at 2.25-2.5-% in Dec 0f 2018. Then once again started to gradually lower until the recent financial downturn when they were placed at 0-.25%.

Fed Funds Futures Facts

The Fed funds rate is arguably the most important interest rate the economy has to offer. The Fed funds rate is the barometer for all other interest rates that affect our economy and personal lives like mortgage rates, federal student loan rates, and car loans.

Fed Funds Futures Trading

  • Fed Funds futures contracts are listed monthly and can be listed as far out as 36 months
  • The price of a fed funds futures contract is calculated by taking subtracting the implied rate from 100. (ex. Rate is 1.25%…100-1.25= $98.75 (contract price)
  • Fed funds futures are always cash settled contract, unlike commodities, there is no option for physical delivery

Fed Funds Futures Contract Specs

Interest Rates Waiting on Stimulus Package

Greg Perlin

10-Yr T-Note Reinforces Major Peak/Reversal Count

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Tighten T-Note Bear Risk

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Treasuries All Over the Place On Mixed Stimulus Package News

Greg Perlin

Bunds S-T Mo Failure Contributes to Peak/Reversal Count

RJO Market Insights

Interest Rate Trend is Narrow

Greg Perlin

Interest Rates Trending Sideways After Halt in Covid-19 Vaccine

Greg Perlin

Interest Rates Approaching 100-Day Moving Average

Greg Perlin

T-Notes, Bunds, Eurodollars Reinforce Peak/Reversal Processes

RJO Market Insights

S-T Mo Failure Stems T-Note Slide, Exposes Suspected Corrective Rebuttal

RJO Market Insights