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Strategies & Market Trends : Bonds, Currencies, Commodities and Index Futures
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From: Thetwentyrule9/22/2006 4:34:11 PM
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Just wanted to share a little knowledge with everyone on how to read the fedfunds futures index and back contract months. As all of you know the fed recently paused its rate raising policy that was started by Greenspan and stopped by current Chairmen Burnanke. If you look at the current price on the Index and take the difference between it and 100 you will come up with a number very close to the value of the yield on the fedfunds it self. Simply look at this link futuresource.com Your current yield on the fedfunds is 5 1/4% the current contract spot month on the fedfunds 94.755. This will give you a value of 5.245% (keep in mind the index will not always land on the same yield because there will be buying and selling preasure). But what is really interesting to me is that the back contract month ffq07 shows me nearly a .40% decrease in the current yield. Simply look at the current price of August 2007 contract month which is at 95.165 as of the close today 9/22/2006 this reads as a 4.835% which is telling me banks are on the fence for nearly .40% decrease in the next 10 months.

Anyways I hope this was of some value to anyone out there who never understood the fedfunds futures. This is my 1rst post on Silicon and a special thanks goes out to one of my clients out there in the sticks who turned me on to SI. He took the the trades from tobagojack loungetech isopatch & sliderontheblack in his account with me and did better than 9/10 brokers in my office. Great job Brad and will talk on Monday.
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