Futures vs FRAs inversion baffles market participants

upside-down-roads

There is no such thing as a free lunch, the adage goes, but for a period in May, fixed-income markets seemed to think differently. The implied yield of futures contracts on the three-month Euribor rate fell below that of the equivalent forward rate agreement (FRA), violating standard financial theory and historical practice. This implied market participants needed to be paid an additional premium to enter a position that should – theoretically – only have positive income. “It’s like getting paid

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: