Wondering what people think is the better futures instrument to build a position if you believe the Fed will be cutting rates in 2023? A couple options are the 2-Year Note and Eurodollars. It seems that Eurodollars is really the only product that has liquidity a year or two out -- if you assume the rate cutting cycle will take a while. Am I wrong in assuming that if the Fed starts cutting rates it will be priced into forward dated 2 year futures, so that rolling from say a March to a June contract would leave money on the table? It seems like Eurodollars is a way around this problem, if it is in fact real. Any feedback is welcome and appreciated.
I've stopped using Eurodollars and moved over to SOFR futures @ CME. OI is larger and liquidity MUCH better. The euro complex will be converted over to SOFR I think in June next year. Other options TU's 2yr futures, CME 2yr Micro yield futures.
If you want to take a view that specifically Fed Funds will be lower at some future time than markets currently expect, SOFR futures are the way to go.
These are great options. Not sure I have access to SOFR w my broker. Eurdollars would give me enough liquidity I think. Thoughts on rolling a 2-year during a fed cutting cycle? Would you think that a March to June roll would leave a lot of money on the table?
I currently use Z23 for my spec positions EDZ23 OI =763,538 SFRZ23 OI = 869,396 Just saying... the spec has moved to SOFR and will continue to.