a series of news articles coming out of Uk regarding inflation fears, I guess a novice question, what product(s) are available to a US investor to make a play on Bank of England raising interest rates. I guess Sterling libor or Bank Base Rate, but where do they trade, under what symbols? How closely are those two related to Eurodollar futures, would they always follow each other? ... thanks
well, I'm not as worried whether we 'really' have an inflation or if it's just an excuse, but when the bank of England and treasury tell you to watch out for higher rates you better pay heed. But my question to the forum is about specific instruments that track short term interest rates in England
Here you go: http://www.euronext.com/trader/cont...fications-3657-EN.html?euronextCode=L-LON-FUT Very liquid stuff, but prone to flights of fancy and overreaction...
Those news stories were probably planted by market players looking to go long Short Sterling. Try to be less of a babe in the woods when it comes to trusting info on the markets, and in the press in general.
Think you're wrong in this particular case, GoC... Have you seen where UK CPI has actually been printing recently? Check this out: http://macro-man.blogspot.com/2010/05/innffflllaaaayyyshhuunnn.html (caveat: I am short short stg).
it seems the contract expiring June 16 is trading at 99.25 so .25% higher than the bank rate with only a few days to go, shouldn't it be .5% at expiration? the next few month trade closer to 99, so almost .5% premium already
Did you read the contract specification carefully? It mentions that a short sterling contract's EDSP is determined by the 3M GBP LIBOR fixing published on the last trading day, rather than the bank rate. Hence what you're observing is the spread between LIBOR and base (as well as the risk premium in contracts further out).