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TraDaToR

Registered: Dec 2006
Posts: 3787

02-09-12 09:07 AM

Hello,

I am new to rates.

Does it sometimes happen that one expiry is cheaper than further ones on Eurodollar? Fed Funds ? It would mean that the longer term rate is less than the shorter one and also that the difference is so important that the shorter bond is making more in less time( If that makes sense...LOL ).

Does the fact that we are trading futures instead of the bond itself makes a difference?( I don't know the exact relationship between bonds and bond futures ).

Thanks.

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trade2live

Registered: Jan 2009
Posts: 315

02-09-12 09:30 AM

contango is a term that applies to commodities not financials. interest rate expectations will determine the shape of the curve for the different expiries, it's not a commodity product, so no contango.

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Martinghoul

Registered: Jan 2009
Posts: 5641

02-09-12 10:45 AM

Quote from trade2live:
contango is a term that applies to commodities not financials. interest rate expectations will determine the shape of the curve for the different expiries, it's not a commodity product, so no contango.

+1

"Steepness" and "inversion" are the relevant terms.

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TraDaToR

Registered: Dec 2006
Posts: 3787

02-09-12 04:48 PM

OK Thanks. So how often does inversion occur?

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Martinghoul

Registered: Jan 2009
Posts: 5641

02-09-12 04:54 PM

Quote from TraDaToR:
OK Thanks. So how often does inversion occur?

These days? Anything's possible, given the fun 'n games in LIBOR/Funds basis.

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