By Owain Johnson and Bobby Timberlake for CME Group
Perhaps the most-watched US financial benchmark — the Federal Funds (FF) target rate — is attracting significant new attention from traders as volatility returns to the US interest rate market, after a prolonged period of stable and very low rates.
FF futures settle each month to a simple average of the daily Effective Federal Funds Rate subtracted from 100. The futures contract allows firms the ability to hedge short-term interest rates or to express a view on the Fed's likely direction of travel.
FF contracts with longer terms to expiry also allow market participants to act on views as far ahead as a year where there is greater uncertainty, given that the Federal Reserve incorporates new economic data into each meeting's outcome.
아마도 가장 많이 관찰된 미국의 금융 벤치마크인 연방기금(FF) 목표금리는 장기간의 안정적이고 매우 낮은 금리 후에 미국 금리 시장으로 변동성이 돌아오면서 거래자들의 새로운 관심을 끌고 있다. FF 선물은 매월 100에서 뺀 일일 유효 연방기금 금리의 단순한 평균으로 결제한다. 선물 계약은 기업들이 단기 이자율을 회피하거나 연준의 여행 방향에 대한 견해를 표현할 수 있게 해준다.
또한 FF 계약 기간이 더 긴 FF 계약은 연방준비제도이사회(FRB)가 각 회의의 결과에 새로운 경제 데이터를 통합한다는 점에서 불확실성이 더 큰 한 해까지 시장 참여자들이 관점에 따라 행동할 수 있도록 한다.
Managing rate risk(요율위험관리)
After a long period of interest rate stability in the wake of the global financial crisis, with a target range of 0-0.25%, the Fed announced a series of nine increases between 2015 and 2019 followed by a cut in autumn 2019.
This period of greater central bank activity led to a significant renewal of interest in trading and hedging Federal Funds futures.
Volume and open interest trended sharply upward, with visible spikes대못) preceding rate changes. Even when compared to the most active periods of the low-interest era, both volume and open interest increased by around a factor of five. For 2019, average daily volume has reached nearly 400,000 contracts, with open interest around 2.2 million. Using the contract multiplier of $4,167, these numbers represent around $1.6 billion and $9 billion in notional exposure(노출:발표), respectively.
글로벌 금융위기의 여파로 오랜 기간 금리 안정세를 보인 뒤 목표범위가 0-0.25%로 2015~2019년 9차례 인상된 데 이어 2019년 가을까지 9차례 인상안을 발표했다. 이러한 중앙은행활동의 증가는 연방기금선물거래와 위험회피에 대한 지분의 유의적인 갱신으로 이어졌다. 볼륨과 오픈 이자는 급격한 상승 추세로, 눈에 보이는 급상승)이 선행되었다. 저금리 시대의 가장 활발한 시기와 비교해도, 부피와 오픈 이자는 모두 5배 정도 증가했다. 2019년 동안 하루 평균 40만 건 가까이 계약되었고, 약 220만 건이 공개되었다. 계약 곱셈 4,167 달러를 사용하면, 이러한 수치는 각각 약 16억 달러와 90억 달러의 개념적 익스포저(발표:노출)를 나타낸다.
Participation triples(참여 3배)
This growing volume was not simply concentrated among a few extremely large players, but rather came from new participants and smaller players increasing their holdings over time.
The Large Open Interest Holders count tracked by the CFTC shows that the number of counterparties holding reportable futures positions has more than doubled since the recession. Compared to the depths of the zero-interest rate environment around 2013, they have more than tripled.
이러한 증가량은 단순히 소수의 극도로 큰 선수들 사이에만 집중된 것이 아니라, 새로운 참가자들과 시간이 지남에 따라 그들의 보유량을 늘리는 소규모 선수들에게서 나온 것이다. CFTC가 추적한 Large Open Interest Holders 수치에 따르면, 경기 침체 이후 보고 가능한 선물 포지션을 보유하는 거래처의 수가 두 배 이상 증가했다. 2013년을 전후해 제로금리 환경이 심했던 것과 비교하면 3배 이상 급증한 겁니다.
Predictive power(예측력)
Some market participants also use the price signals from Federal Funds futures as a predictive signal of the FOMC's likely rate decisions. Comparing front-month Fed Funds futures prices, as observed four weeks ahead of a Fed meeting, with the Fed target rate after the meeting shows that the futures market is a relatively accurate guide.
Over the last 15 meetings to September 2019, Fed Funds futures have priced an average around two basis points away from the target rate, with a maximum divergence of 11 bps when moves of 50-75 bps occurred regularly. The two outliers arose in January and October 2008, when the Federal Reserve made emergency cuts totaling 125 and 100 basis points for those months.
Futures prices a month out did not anticipate off-cycle or larger than standard cuts, but after each unscheduled cut the futures quickly re-priced to include the new expectations, landing within 10 bps of the realized target rate.
CME Group, Federal Reserve
The growth in trading volume and participation in Fed Funds futures looks to have increased the spectrum of viewpoints being incorporated into its price discovery, increasing its predictive abilities. But whatever the cause, the Fed Funds futures serve as an efficient tool for near-term interest rate hedging.
In a time of shifting expectations about where the Fed will or won't move its target rate, that makes it a key barometer for anyone following financial markets.
