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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Louis V. Lambrecht who wrote (5358)	1/17/2004 1:20:08 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

3-month T yield 0.87 January ED (just expired) at 98.8775 99.0000 - 98.8775 = .1225 or 12.25BPs less than FF rate. According to the Eurodollars futures handbook, the final settlement price is determined like this: The ED futures contract is cash settled to a final settlement that is tied to the 3-month LIBOR. The final settlement price is 100 minus the British Bankers Association Interest Settlement Rate (BBAISR) for 3 month ED interbank time deposits riunded to nearest 1/10,000th percentage point. In order to calculate the BBAISR the BBA selects 16 reference banks, all of whom are major participants in EDs and asks them the rate they could borrow US$ thru the interbank. Quotes are ordered and ranked, and the middle 2 quartiles are averaged. whew! A TED spread is the difference between treasury rates and ED rates and you can play this by buying ED futures and selling Treasury futures. If you think the TED will increase you buy treasuries and sell EDs. I have no reason to think the TED spread will tighten or loosen.