Trading the Interest Rates Markets

It’s the glue. Interest rate markets bind and are tethered to every other financial asset class from stocks to currencies. The US Federal Reserve Bank and other central banks around the globe shape and push economic growth in the short and long term. Central bank moves can tighten or expand the amount of money circulating in an economy, which then impacts the value of a currency, which then affects the value of commodities and companies – across the globe.

So you can see the power the Fed has on US markets and beyond. Interest rate futures and options contracts may be used to hedge against risks that can adversely affect portfolios or balance sheets. Yet, they also provide trading and spreading opportunities across many different markets for traders and can be some of the deepest and most liquid futures markets in the world.

These markets are primarily event-driven , meaning participants are looking for opportunities and risks in every Fed meeting, announcement, Fed speech or testimony, not to mention key economic reports from employment rates to manufacturing data.. This allows traders to go long or short across the yield curve, from 3-month Eurodollar futures and up the line to 2-year, 5-year, 10-year notes along with 30-year Treasury bond futures and Ultra Treasury bond futures.