{"id":428,"date":"2015-07-31T10:54:08","date_gmt":"2015-07-31T10:54:08","guid":{"rendered":"http:\/\/www.stirfutures.co.uk\/?p=428"},"modified":"2015-07-31T11:01:18","modified_gmt":"2015-07-31T11:01:18","slug":"interest-rates-rises","status":"publish","type":"post","link":"https:\/\/www.stirfutures.co.uk\/?p=428","title":{"rendered":"Policy rate tightening"},"content":{"rendered":"<p>With all this talk about Fed tightening in the autumn with UK rises to follow in early 2016, it might be useful to remind ourselves of the strong inverse relationship between stir futures and policy rates. Of course, stir futures are LIBOR linked derivatives but LIBOR is very closely correlated with policy rates making stir futures ideal for the systematic trading of policy rate changes.<\/p>\n<p>The first chart shows the front month continuous short sterling contact (orange RHS) and the BOE Base Rate (purple LHS) over the last 20 years.<\/p>\n<p><a href=\"http:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/UK.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-426\" src=\"http:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/UK.jpg\" alt=\"UK\" width=\"1172\" height=\"665\" srcset=\"https:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/UK.jpg 1172w, https:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/UK-300x170.jpg 300w, https:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/UK-1024x581.jpg 1024w\" sizes=\"auto, (max-width: 1172px) 100vw, 1172px\" \/><\/a>\u00a0Source: Reuters Eikon<\/p>\n<p>The inverse relationship is clear and most importantly shows that when policy rates start changing, stir\u00a0futures\u00a0start trending.<\/p>\n<p>Same with the US. (Eurodollar\u00a0front month continuous in purple (LHS) and Fed Funds Effective Rate in orange (RHS)<\/p>\n<p><a href=\"http:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/US.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-425\" src=\"http:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/US.jpg\" alt=\"US\" width=\"933\" height=\"564\" srcset=\"https:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/US.jpg 933w, https:\/\/www.stirfutures.co.uk\/wp-content\/uploads\/2015\/07\/US-300x181.jpg 300w\" sizes=\"auto, (max-width: 933px) 100vw, 933px\" \/><\/a><\/p>\n<p>Source: Reuters Eikon<\/p>\n<p>It can also be observed that the US often acts preemptively to the UK. When America sneezes, the UK catches a cold.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With all this talk about Fed tightening in the autumn with UK rises to follow in early 2016, it might be useful to remind ourselves of the strong inverse relationship between stir futures and policy rates. Of course, stir futures are LIBOR linked derivatives but LIBOR is very closely correlated with policy rates making stir [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[48,15,47],"class_list":["post-428","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-base-rate","tag-fed-funds","tag-interest-rate-rises"],"_links":{"self":[{"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/428","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=428"}],"version-history":[{"count":5,"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/428\/revisions"}],"predecessor-version":[{"id":433,"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/428\/revisions\/433"}],"wp:attachment":[{"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=428"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=428"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.stirfutures.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=428"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}