Trading US Short Term Interest Rates Higher

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For beginners see this trade, for more advanced traders see the links below.

1) Tracking these trades and/or experimenting with any potential outcome for them.

1.1) How to use this spreadsheet (5 minutes 41 seconds)

2) Four trades to capture the move higher in rates and the tools to track them.

2.1) Trade #1

Short ZQZ18 (December 2018 Fed Funds Futures) at 99.1650

100.0000   Represents a rate of 0.0000% (100.0000 – price = rate)
-99.1650    Subtract the contract entry price
0.8350%  = Markets anticipated rate for Dec. 2018 delivery at entry

100.0000   Represents a rate of 0.0000% (100.0000 – price = rate)
-97.9000    Price at the lowest anticipated rate by the Fed by Dec 2018
2.1000%   = The lowest anticipated rate by the Fed for December 2018 delivery

We’re short, positioned to capture the move lower in the ZQZ18’s contract price from 99.1650 to 97.9000. This represents an increase in the Fed Funds rate from 0.8350% to 2.1000%, the the lowest of the Federal Reserve’s expectations for this rate by the end of December 2018.

Current Chart & Quotes.  Each 0.01 change in price down = +$41.67 up -$41.67

Screenshot_9
Source Federal Reserve

2.2) Trade #2  spread trade

Long GEZ17   December 2017, 3 month deposits contract specifications
Short GEZ18  December 2018, 3 month deposits contract specifications
Entry price = 0.1050, premium to December 2017

Market’s anticipated rate hikes from Dec. 2017 to Dec. 2018 at entry 0.1050%

Minimum Fed anticipated rate hikes from Dec. 2017 to Dec. 2018 = 0.7000%

We are positioned to capture the move as the spread widens from our entry at 0.1050 to the lowest Fed target of 0.7000 by December 2019.

Current chart & Quotes  Each 0.01 = $25.00

Screenshot_24
Source Federal Reserve

2.3) Trade #3  spread trade

Long GEZ17   December 2017, 3 month deposits contract specifications
Short GEZ19  December 2018, 3 month deposits contract specifications
Entry price = 0.4250, premium to December 2017

Market’s anticipated rate hikes from Dec. 2017 to Dec. 2019 at entry 0.4250%

Minimum Fed anticipated rate hikes from Dec. 2017 to Dec. 2019 = 1.5000%

We are positioned to capture the move as the spread widens from our entry at 0.4250 to the lowest Fed target of 1.5000% by December 2019.

Current chart & Quotes  Each 0.01 = $25.00

Screenshot_32Source Federal Reserve

2.4) Trade #4  spread trade

Long  GEZ17  December 2017, 3 month deposits contract specifications
Short GEZ20  December 2018, 3 month deposits contract specifications
Entry price = 0.4500, premium to December 2017

Market’s anticipated rate hikes from Dec. 2017 to Dec. 2019 at entry 0.4500%

Minimum Fed anticipated rate hikes from Dec. 2017 to Dec. 2020 = 1.5000%

We are positioned to capture the move as the spread widens from our entry at 0.4500 to the lowest Fed target of 1.5000% by December 2020.

Current chart & Quotes  Each 0.01 = $25.00

Screenshot_31
Source Federal Reserve

3) Other US interest rate markets we trade 

Screenshot_74

4) European interest markets we trade 

Screenshot_76

5) Lowest of Fed expectations for rate hikes through 2019.  (June 2017)

6) Median Fed expectations for rate hikes through 2019  (December 2014) however the Fed has been wrong on nearly every economic forecast and literally every rate call since 2008. The standard joke is the Fed no longer stands for Federal Reserve but failed economic policy.

7) Fundamentals

7.1) For the Fed site with all press conference videos and statements

7.2) The low end of Fed expectations call for the Fed Funds rate by December 2019 of 2.90%, 2.12% below the 60 year average.

Current Fed graph 1954 through 2017

Screenshot_22Source Federal Reserve

7.3) A few articles I’ve written on rates, inflation and the Fed

7.4) The last tightening cycle

30 June 2004 1.25% contract value $5,208

29 June 2006 5.25% contract value $21,875 

Source Federal Reserve

8) Fee structure and defining overall account risk

9) Open an account for minimums of 10K to 500K USD or major currency equivalent, for account greater than 500K you can work with the majority of the firms listed on this page.

If you’d like to review this and/or other programs/markets please contact us or schedule an online review using this link, we’ll answer all your questions and provide you supporting links for additional information and/or verification.

 

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Asset Investment Management

Family Office, Advisors

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