Interest Rates Trading Information

Interest Rates Trading

Interest Rates Futures Trading Defined and Explained

A Futures contracts’ underlying security is a debt obligation. Interest rate futures are defined as a percentage of the value of the applicable debt. The value of interest rate futures contracts is tied to interest rates. A change of one basis point in interest rates causes a corresponding price change. Those who trade in interest rate futures do not usually take possession of the actual financial product.

Interest Rates Futures Trading

The Chicago Board of Trade deals with the U.S. T-Note and T-Bond futures. T-notes and bonds are know for their liquidity and it is fairly easy for traders to enter and exit positions quickly. Treasury Bond and Note Futures are often used as hedging instruments in an attempt to protect a portfolio's value as well as lock in a future purchase price.

Interest Rates Futures Trading Strategy

The Chicago Mercantile Exchange trades interest rate futures to manage interest rate risks up to ten years into the future. The CME market mainly comprises the short-term, heavily traded credit products which mature in less than one year.

The Chicago Board of Trade offers CBOT Treasury futures, which are interest rate futures on the longer end of the yield curve. Each CBOT Treasury futures contract establishes government-backed specifications for the financial instruments a trade can deliver.

Interest Rates Futures Trading Software

Would it be great if, as a trader, you could see the future? The closest you will get to a crystal ball in your trading is with VantagePoint software. Using forecasts of market trend direction in conjunction with predicted highs and lows greatly increases the potential for successful Interest Rates futures trades. VantagePoint trading software allows you to predict market moves days ahead of when they happen with nearly 80% accuracy. VantagePoint even allows you to visualize forecasts and indicators graphically on your computer for ease of use.

Interest Rates Futures Trading History

The Chicago Board of Trade first introduced it’s GNMA contract in 1975. The CBOT interest rate futures and options are the most actively traded type of futures contract worldwide. The underlying governmental debt instruments make this a safely backed trade, although traders can still lose money depending on the position they take in a trade buy.

The products include; certificates of deposit, federal funds, U.S. Treasury bills, bankers’ acceptances, Eurocurrency deposits, and commercial paper. Capital-market instruments include medium-term notes, state and municipal bonds, mortgage-backed securities, and U.S. Treasury bonds and notes. Prices of interest rate futures rise and fall in inverse relationship to changes in interest rates.

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* VantagePoint's accuracy statistics were computed on out-of-sample price data utilizing neural networks trained on both single market and intermarket data and relate to the Neural Index which indicates whether the average of tomorrow’s typical price and the typical price of the day after tomorrow (both unknowns at this time) are expected to be higher or lower than the average of yesterday's typical price and the typical price of the day before yesterday. The numerical value of the Neural Index, either a one (1) or a zero (0) thereby indicates whether or not the trend direction is expected to be higher or lower for each target market over the next two days. A Neural Network accuracy statistic of 80% does not mean that eight out of ten trades will be winning trades. VantagePoint is not a trading system that gives the same specific buy and sell signals to all users. It is a technical forecasting tool that is comprised of proprietary forecasting indicators that apply neural networks to market data for the purpose of finding patterns and relationships between markets and then using this information to make futuristic forecasts. Using these indicators each trader determines his or her own entries, exits and stop placements which may vary from those of other traders due to differences among traders in trading style, objectives, risk propensity, account size and number of contracts involved, thereby producing different trading results from one trader to another. Futures and options trading involves risk, is not for every trader, and only risk capital should be used. For more detailed information, please read our Important Disclaimer, Privacy Policy, and Software License Agreement.

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