www.ONN.tv Hunts for Economic Recovery in Eurodollar Yield Curves

CHICAGO--(BUSINESS WIRE)--On www.ONN.tv’s Mark2Market Futures channel Wednesday morning, host Kevin Cook invited economist Howard L. Simons to breakdown the mechanics and “tea leaves” of Eurodollar interest rate futures. Reporting from the floor of the CME/CBOT with the most liquid futures contract in the world behind them, Cook and Simons dissected the forward interest rate curve that these 40 contracts for 3-month LIBOR deposits represent. After clarifying how 3-month Eurodollar futures accurately reflect the supply of and demand for short-term funding many years hence, and thus how they create synthetic forward yield curves from tightly-arbitraged feedback loops, Simons pointed to signs of credit demand showing up in the forward curve.

Contrary to common wisdom about credit supply and low interest rates fueling economic activity, Simons is looking to implied Eurodollar yields to gage contraction and expansion on the heels of one of the greatest credit crises the global economy has ever seen. What he sees is a glimmer of hope in the current "forward rate map" with both spot rates and synthetic rates bottoming around the March 2009 contract level. Beyond March, short rates in the forward curve quickly begin to ramp-up in a steepening yield curve. This indicates demand for future borrowing—and that implies economic recovery could be seen as early as Q4 2009. Simons, who does proprietary research and consulting from his home near Chicago, wrote about this phenomenon in the October SFO Magazine, and as recently as this week on RealMoney.

The interview can be found under the “Yield Curve Update” tab on the Mark2Market channel or through this link:

http://link.brightcove.com/services/link/bcpid1653591038/bclid8809077001/bctid9312558001

Mark2Market programming is exclusively sponsored by Mirus Futures.

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