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Strategies & Market Trends : John Pitera's Market Laboratory
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To: Louis V. Lambrecht who wrote (6195)5/28/2002 11:06:37 PM
From: John Pitera  Read Replies (1) of 33421
 
Right Louis, but we've found through experience that you key off of the contract that's the most active and with the greatest open interest.

The Dec Eurodollar future (not the EuroCurrency) has been the largest open interest contract the past 3 months. The greatest concentration of open interest also tells you something about market expectations.

The Eurodollar futures is one of the very deepest contracts in the world. The Notional value of the contracts was around 5 Trillion I believe around 2 months ago.

If you want to see glimpses into what the Interbank currency forward desks and swaps desks are up to, The Eurodollar contracts help to flesh out the picture.

That's why I talk about them periodically. And you'll notice that even many very smart and knowlegeable market people never talk much about the Eurodollar contract movements.

But they sure as heck do at places like the trading floors of Citi and JPM.

The Eurodollar contracts also go out a full 10 years into the future... so you want to know what's going to happen in the future? Why not see how the markets are pricing the future of interest rates?

The Eurodollar contract is as influenced by Central Bank action or inaction as any other market. And we know those Central Bankers sit around and contemplate the future.

John
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