Positioning for Fed Rate cuts: 2YR vs Eurodollar futures

K

killATwill

Wondering what people think is the better futures instrument to build a position if you believe the Fed will be cutting rates in 2023?

A couple options are the 2-Year Note and Eurodollars. It seems that Eurodollars is really the only product that has liquidity a year or two out -- if you assume the rate cutting cycle will take a while.

Am I wrong in assuming that if the Fed starts cutting rates it will be priced into forward dated 2 year futures, so that rolling from say a March to a June contract would leave money on the table?

It seems like Eurodollars is a way around this problem, if it is in fact real.

Any feedback is welcome and appreciated.
 
I've stopped using Eurodollars and moved over to SOFR futures @ CME. OI is larger and liquidity MUCH better. The euro complex will be converted over to SOFR I think in June next year.

Other options TU's 2yr futures, CME 2yr Micro yield futures.
 
killATwill said:
Wondering what people think is the better futures instrument to build a position if you believe the Fed will be cutting rates in 2023?

A couple options are the 2-Year Note and Eurodollars. It seems that Eurodollars is really the only product that has liquidity a year or two out -- if you assume the rate cutting cycle will take a while.

Am I wrong in assuming that if the Fed starts cutting rates it will be priced into forward dated 2 year futures, so that rolling from say a March to a June contract would leave money on the table?

It seems like Eurodollars is a way around this problem, if it is in fact real.

Any feedback is welcome and appreciated.
More...

If you want to take a view that specifically Fed Funds will be lower at some future time than markets currently expect, SOFR futures are the way to go.
 
Specterx said:
If you want to take a view that specifically Fed Funds will be lower at some future time than markets currently expect, SOFR futures are the way to go.
More...

This is a great option. Not sure my broker offers them but will check.
 
Specterx said:
If you want to take a view that specifically Fed Funds will be lower at some future time than markets currently expect, SOFR futures are the way to go.
More...

My first thought too but they don't offer the liquidity I'd like on long-dated contracts.
 
Repoguy said:
I've stopped using Eurodollars and moved over to SOFR futures @ CME. OI is larger and liquidity MUCH better. The euro complex will be converted over to SOFR I think in June next year.

Other options TU's 2yr futures, CME 2yr Micro yield futures.
More...

These are great options. Not sure I have access to SOFR w my broker.

Eurdollars would give me enough liquidity I think.

Thoughts on rolling a 2-year during a fed cutting cycle? Would you think that a March to June roll would leave a lot of money on the table?
 
I currently use Z23 for my spec positions

EDZ23 OI =763,538
SFRZ23 OI = 869,396


Just saying... the spec has moved to SOFR and will continue to.
 
killATwill said:
Wondering what people think is the better futures instrument to build a position if you believe the Fed will be cutting rates in 2023?

A couple options are the 2-Year Note and Eurodollars. It seems that Eurodollars is really the only product that has liquidity a year or two out -- if you assume the rate cutting cycle will take a while.

Am I wrong in assuming that if the Fed starts cutting rates it will be priced into forward dated 2 year futures, so that rolling from say a March to a June contract would leave money on the table?

It seems like Eurodollars is a way around this problem, if it is in fact real.

Any feedback is welcome and appreciated.
More...
SOFR won't work out much as it'd NOT respond as LIBOR #Eurodollar contracts could have reacted.
 
You must log in or register to reply here.
Back
Top