Eurodollar – US dollar which is deposited outside USA. The most of the eurodollar are held in London branches of the biggest worldwide known banks. These dollars are the base for USD loans accommodated  by the European commercial banks and per se show 3 month interbank offered interest rate or so called 3M LIBOR. (more…)

Short term rates demonstrate economic processes: interest rate increase on the one hand may reflect money (financial resources) demand increase, on the other hand slows down economic development and as a result stock market growth, later create the downside trend in stock market. Interest rate decrease may reflect money (financial resources) demand decrease and fasten economic development and as a result stock market growth. (more…)

US Federal Reserve System (shortly FED) impact US economy basically by two interest rates: discount rate (primary credit rate) and fed funds rate. FED directly settles discount rate but fed funds rate it can influence indirectly through operations in the open money market. It works in the following way: commercial banks are obliged to hold a certain part of  the money held by society onto their accounts and if a bank do not have enough liquidity it can borrow some excess of reserves from another bank. This is a fed funds trade. (more…)

Greetings, let’s talk about interaction between long term and short term interest rates. Bond yields depend on market participant predictions (but not the only!) of inflation. Therefore we can expect that basis interest rates, which react at inflation processes in economy, more influence short term rates and less long term. Factors which have an impact onto the yields were discussed in the article “yield curve”. (more…)

Operation with bonds and other debt instruments is a big par of investment and short-term speculation operations in the financial markets. Talks about FOREX liquidity are quite simplified. It is difficult to calculate the volume in the World cause it is a spot market and there are question how it is calculated and what is included in it? At the same time it is a fact (cause you can check it) that the 10 year T-note futures contract volume which is traded at eCBOT is $100 billion a day and even more. And this is only one contract! (more…)