Bond Investors Have A Unique Take On Where Interest Rates Are Headed

Stéphane Renevier

6 months ago1:24 min

Bond Investors Have A Unique Take On Where Interest Rates Are Headed

If you’re not familiar with eurodollars, they’re short-term dollar-denominated bonds held in banks outside the US. That means they’re free from regulation by the country’s central bank and less manipulated than markets inside the States, but that they’re still highly liquid. That combination makes them an ideal way of working out (with some very complicated math) how much of a percentage rate hike bond investors are expecting, in what’s known as the “eurodollar gauge of implied rate hikes”.

That gauge is depicted in the chart above, where you can see what investors have been expecting since last October with regards to two different periods of interest rate hikes: from the present day till June 2023 (black line), and from June 2023 till December 2024 (orange line).

The recent divergenc

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