What Does the Market Tell Us About Interest Rates?
Interest Rates are set to rise currently — there is very little doubt about that with the current Fed target between zero and .25. Short term rates are determined by government monetary policy and remain near historical lows — prices actually went negative because of panic buying in the 2008 collapse – which leaves rates nowhere to go but up. The question is not if rates will go back up, but rather over what time frame they will go back up. All of this movement and the timing is important to commodity investors because without rising interest rates the dollar continues to fall – and a falling dollar is bullish for our overall commodity portfolio. To estimate the timing of interest rate moves I always turn to Eurodollar (not to be confused with Euro Currency) futures. Short-term trading instrument prices move in the opposite direction of the interest rates for Eurodollars. For example the current price of the March Eurodollar of .9973 reflects a rate of .27%. Subtract the price from par
