Eurodollars signal tighter monetary policy coming in late '19/early '20: Bloomberg

|By:, SA News Editor

Some bond traders are looking more at eurodollar futures than the U.S. Treasury yield curve, says Bloomberg columnist Brian Chappatta.

"The world’s most actively traded money-market derivatives give a more precise estimate of when the good times may wind down," he writes.

Eurodollars, which Chappatta says are very sensitive to the expected path of Fed rate increases, signal that central bankers will have to stop raising interest rates late next year or in early 2020. That compares with mid-May when the eurodollar curve was positive through 2021.

"If traders are right, and the Fed will have to stop after a few more hikes, then suddenly 3% appears to be about the best yield investors can expect over the coming decade," he writes.

Eurodollar 3-month down 0.02% to $93.345 today, and down 0.53% YTD.

By the way, the spread between the 2-year and 10-year U.S. Treasury notes are about 28 basis points in midday trading; that compares with 35 basis points two weeks ago.

Previously: Markets taking exception to rising rates (July 5)

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