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Old Feb 9th, 2012, 04:07 AM   #1
TraDaToR
 
 
Join Date: Dec 2006
Location: Lausanne, Switzerland
Posts: 4,117
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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Old Feb 9th, 2012, 04:30 AM   #2
trade2live
 
 
Join Date: Jan 2009
Posts: 399
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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Old Feb 9th, 2012, 05:45 AM   #3
Martinghoul
 
 
Join Date: Jan 2009
Location: London
Posts: 6,506
Quote:
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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Old Feb 9th, 2012, 11:48 AM   #4
TraDaToR
 
 
Join Date: Dec 2006
Location: Lausanne, Switzerland
Posts: 4,117
OK Thanks. So how often does inversion occur?
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Old Feb 9th, 2012, 11:54 AM   #5
Martinghoul
 
 
Join Date: Jan 2009
Location: London
Posts: 6,506
Quote:
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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