An interest rate futures contract, such as a t-bond or Eurodollar contract, has an interest-bearing instrument as an underlying asset. These futures are typically employed to hedge against the risk of interest rates rising or falling in an adverse direction.
Interest Rate Futures Markets:
- 30-Day Federal Funds Federal Fund futures contracts indicate the average daily federal funds effective rate in a particular month.
- Eurodollar Futures A common use for Eurodollar futures contracts is to secure the current interest rate on money it expects to borrow at a later time.
- Swap Futures A swap is a derivative in which two parties exchange each other's financial instruments.
- T-Bond Futures Compared with treasury notes or treasury bonds, t-bonds take the longest time to mature.
- T-Note Futures The most commonly quoted and discussed is the 10-year t-note because it articulates long-term expectations of the market.