That said, because LIBOR is high relative to Fed funds, it is less good of a proxy, because banks are less willing to lend unsecured to each other in
the Eurodollar markets.
Many lenders in the federal funds and
Eurodollar markets with access to the ON RRP facility responded to these low rates by increasing their use of the facility, as shown in Figure 10.
If you remember how the 2008 financial crisis unfolded, one of the key signals was the soaring TED spread... the spread between the risk free T - Bill interest rate and the overnight rate charged to corporate borrowers in
the Eurodollar market.
Not exact matches
As with other prices, if we are interested in what's going on with dollar exchange values (not be confused with
eurodollars, the shadow conditions behind everything) we have to start with the futures
market.
By CountingPips.com — Receive our weekly COT Reports by Email
Eurodollar Non-Commercial Speculator Positions: Large speculators continued to increase their bearish net positions in the
Eurodollar futures (interbank dollar deposits, not euro currency)
markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.
If you're looking for a short - term money
market investment, Webster's
Eurodollar Time Deposits may be a good choice.
The increasing prevalence of floating rate finance should make the system more sensitive to Fed policy, but even more to LIBOR in the
Eurodollar -
markets, which the Fed can't directly affect.
The third type of money
market fund is by far the most common and the list of short - term securities that it can hold Treasury Bills, commercial paper, repurchase agreements, whiskey warehouse receipts, bankers» acceptances, short - term CDs,
eurodollars and other similar instruments with maturities of 120 days or less.
Now, perhaps this is a bad argument for a different reason: the Fed funds futures
market trades alongside all of the short - term debt
markets —
eurodollars, CP, T - bills, etc..
1) The TED [Treasury -
Eurodollar] spread, which is a measure of
market confidence, is up dramatically over the past two months, from 18 basis points to 52 at present.
Eurodollar Future — June 2010 Comment: Nothing to add since last weekâ $ ™ s report and nothing happening in the cash
market.
Eurodollar Future — June 2010 Comment: As front month
Eurodollar contracts continue to inch up towards 100.00, and red months to new record highs, the zero interest rate policy has done nothing to resuscitate the corpse that is the money
market â $ «today and for over a year.
Trading in
Eurodollar futures is extensive, and the
market for them tends to be very liquid.
Eurodollar futures prices are determined by the
market's forecast of the 3 - month US$ LIBOR interest rate expected to prevail on the settlement date.
It's ironic that
eurodollar futures
markets dominate trading, not those for Treasury bills or federal funds on which
eurodollars are essentially based.
Now the futures
market assumes that the Fed will raise its target rate in the course of this year, so the LIBOR rate on which
eurodollar futures settle will increase by 1.22 percentage points between January and December.
There is a budding distrust in the
Eurodollar lending
markets, and that could spill into the short term lending
markets in the US, though the effect should be less than in the Eurozone, where distrust is building across national borders.