is there a US version of LIBOR?

[brut]

seems strange that the eurodollar interest rate contract at CME is based on Dollar Libor. Why don't they base it on American banks rate?

short sterling is based on the bank rate in its home country. why don't the US do the same?

 

[arabianights]

Actually ICAP have recently introduced a competitor to LIBOR for the USD called NYFR for more or less the reasons you mentioned.

See www.icap.com/news/2008/icap-launches-nyfr-fixings.aspx

 

[arabianights]

GJ, by now you should have twigged I don't know anything

 

[Rhody Trader]

seems strange that the eurodollar interest rate contract at CME is based on Dollar Libor. Why don't they base it on American banks rate?

short sterling is based on the bank rate in its home country. why don't the US do the same?

Eurodollars are dollars on deposit (or for loan) outside the US. As such domestic US rates are not really appropriate - though obviously they influence. That's what LIBOR is all about. If you want to trade the US equivalent of short sterling then trade the T-Bill contract.

 

[brut]

john, thanks. so t bill is the equivalent to short sterling.

am i correct in saying that the t-bill is a bond however? ie is the t-bill future an interest rate future or a bond future?

 

[Rhody Trader]

john, thanks. so t bill is the equivalent to short sterling.

am i correct in saying that the t-bill is a bond however? ie is the t-bill future an interest rate future or a bond future?

No. A T-Bill is a discount security and they have initial maturities of 1 year or less. The T-Notes are in the 2-10 year maturity ranges. T-Bonds are longer, generally 30 years at issuance.

T-Bill futures are futures on T-Bill prices, which are discounted based on their yields.

 

[Blangis]

thanks john, sorry for more questions. am i right to say the t-notes and t-bonds are considered bonds, but not the t-bills? what category of securuty do t bills fall into?

 

[Blangis]

sorry, as you say, t bills are discount securities. is this becuase they dont have a coupon but rather sell at a discount?

so these are equivalent to short sterling in the sense their price is directly linked to short term interest rates

 

[Rhody Trader]

thanks john, sorry for more questions. am i right to say the t-notes and t-bonds are considered bonds, but not the t-bills? what category of securuty do t bills fall into?

T-Notes are coupon paying (semi annual interest) instruments which have initial maturities at issuance of 2 to 10 years. T-Bonds are also coupon paying instruments, but have initial maturities longer than 10 years. Functionally, however, they are the same thing. Both pay semi annual interest and repay the principal at maturity.

t bills are discount securities. is this becuase they dont have a coupon but rather sell at a discount?

Right. The difference between what you pay for the T-Bill and what you receive at maturity (which is par) is the interest earned.

 

[brut]

thanks