As detailed in this section of the Wikipedia page on the Yield Curve, we can construct the yield curve from the money market as follows:

  • The LIBOR rates give us the short end of the curve (t < 3m)
  • IR futures give us the midsection of the curve (3m <= t <= 15m)
  • IR swaps give us the long end of the curve (1y <= t <= 60y)

On the right-hand side of the page there is a table showing typical inputs to the money market curve:

Type Settlement date Rate (%)
Cash Overnight rate 5.58675
Cash Tomorrow next rate 5.59375
Cash 1m 5.625
Cash 3m 5.71875
Future Dec-97 5.76
Future Mar-98 5.77
Future Jun-98 5.82
Future Sep-98 5.88
Future Dec-98 6.00
Swap 2y 6.01253
Swap 3y 6.10823
Swap 4y 6.16
Swap 5y 6.22
Swap 7y 6.32
Swap 10y 6.42
Swap 15y 6.56
Swap 20y 6.56
Swap 30y 6.56

There is a footnote stating the data is for lending in US dollar, taken from October 6, 1997.

Concentrating just on the midsection of the curve (the futures), I see in the contract specification for CME's Eurodollar futures that the underlying is the 3 month LIBOR rate.

So, at expiration, the Dec-97 future settles at the current 3 month LIBOR rate.

Does this, in effect, mean that the Dec-97 future gives us the Mar-98 point on the curve? (3 months after Dec-97)

In other words, if we look at the previous row in the table, which is the 3 month LIBOR rate (5.71875%), and given the data was taken on the 6th October 1997, this is the rate at 6th October + 3 months = 6th December 1997, whilst the Dec-97 future rate on the 6th October 1997 was 5.76%, which is the rate at settlement of the Dec-97 future (13th December 97), forward 3 months, because it's underlying is 3 month LIBOR, so ~13th March 1998.

Is that correct?


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