Eurodollar market

Meaning, Benefits, Effects and Short Comings!

Eurodollar market

Sure, you may have to strain your ears to understand Singlish in Singapore, and Texans have their own version of most everything, so why not English? And heaven forbid you find yourself in a pub full of drunken Glaswegians. Still, English is the grease in the cogs of global communications and so it is with dollars in global finance.

Dollar deposits in their birthplace US are well, just dollars. Dollar deposits outside of the US are like Singlish or Ingrish and the dozens of variations across the globe.

Just as dollar deposits outside of the US are still dollars. So eurodollars are essentially all Eurodollar market dollar deposits outside of the US banking system.

Today, however, they are dollar deposits in any bank outside of the US. So dollar deposits in Tokyo, Moscow, and London are all part of the eurodollar system.

They are actually even more than simple dollar deposits, which I'll come to in a bit, but I don't want to confuse you with what is Eurodollar market incredibly complex market, so let's do this one step at a time.

Eurodollar market

You can, for example, have euroeuros or euroyen and these would be euro deposits outside of the EU and euroyen would similarly be yen deposits outside of Japan.

In fact, when cash settled eurodollar futures contracts were introduced to the CME in it was immediately the largest trading pit ever.

Our Global Financing System: Think of it as a deposit and loan market for offshore dollars. It affects asset prices because it is the wholesale financing system most used in the world. It is the big Daddy.

It is a critical component to how banks fund and manage their liability structures. It's also worth pointing out that the eurodollar market is almost entirely a cashless market. It is for simplicity sake, banks' balance sheets.

Very efficient, close to instantaneous, and, in the case of eurodollars, allows for the tapping of huge pools of capital, which can be freed up for financing. Why Should I Care?

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Good question, always worth asking. After all, what good is information you can't or don't execute on? Eurodollars provide us with what is THE best insight into global capital flows and credit demand. Problems in the eurodollar market are problems in the market. Heck, this IS the market. It's as if the eurodollar market is suffering from concussion.

QE doesn't address this problem as it is interest rate driven stimulus and this isn't a cost of capital problem but a collateral problem. But more on this in part II. And it is this collateral which has traditionally underpinned the wholesale funding markets, the largest of which is the eurodollar market.

Remember, dollar denominated debts become increasingly unmanageable as hedging costs rise. This creates a feedback loop whereby, in order to decrease risk, market participants either hedge dollar risk where their collateral is in other currencies but they have USD costs somewhere in their cost structure - think European manufacturers using US technology for example.

Or market participants reduce leverage by unwinding debt positions, and, in order to do so, they have to buy back dollars as they unwind what are short dollar positions. Once again, this pushes the dollar higher. He's promised to lower tax rates to incentivise those jobs to return to the US.

Whether he manages to do this or not we'll have to wait and see. To be clear I'm unconcerned with whether this is a good or bad thing or whether Trump is an angel or a demon. I'm only concerned with what takes place and how I can profit from outcomes. What happens if Trump manages to pull this off?

I'll tell you what happens. And this brings me to eurodollar futures. Bonds, Not Currency Where the rubber meets the road is where this is tradable. Otherwise all we're doing is engaging in intellectual masturbation which while it's fun doesn't change our income statement or balance sheet and that's the objective here after all.

Eurodollar futures are NOT currency futures.Eurodollar Market Facts. The Eurodollar futures market includes U.S.

Eurodollar market

and foreign corporations, individuals and foreign governments. London is a major Eurodollar center because its markets operate during the American and Asian markets.

It is one of the world's primary international capital markets. Active Trader Daily market data and insight for the Individual Active Trader; Cryptocurrency Bitcoin futures and other cryptocurrency products are now available.

STIR Futures: Trading Euribor and Eurodollar futures [Stephen Aikin] on *FREE* shipping on qualifying offers. Short-term interest rate futures (STIR futures) are one of the largest and most liquid financial markets in the world.

The two main exchange-traded contracts. The interbank lending market is a market in which banks extend loans to one another for a specified term. Most interbank loans are for maturities of one week or less, the majority being overnight.

Such loans are made at the interbank rate (also called the overnight rate if the term of the loan is overnight). A sharp decline in transaction volume in this market .

The Eurodollar Market: It All Starts Here This is the first part of a series of articles (I don’t know how many, I’m not done yet) designed to explain what is easily THE most important, albeit poorly understood (even by professionals) market on this ball of dirt.

Nov 17,  · Short answer is Euro Dollar futures are interest rate futures. LIBOR is the London Interbank offered rate, this essentially the rate banks pay to lend each other money in the wholesale money market commonly called Interbank.

Eurodollar Futures | Trading Eurodollar Futures Market | RJO Futures