Front-End Interest Rates Contract
Hi, I'm very new to trading and want some clarification here.
I saw an interview of a HF managers (couple years old) where he talks about being long front-end interest rates contracts.
Can anyone explain in simple terms what that means? I'm assuming front end means short-term, like 1 or 2 years. Is it equivalent to buying a 1/2 year Treasury Bond? Are you being long the yield (interest) or are you long the contract (bond/debt)?
Obviously, I'm very confused here. I'd appreciate some clarification
that is a confusing. if you are long the contract that means you are short interest rates (you want rates for the front-end to go down). if you are long front-end rates, you want front-end rates to go up.
It is also possible he was long eurodollar contracts which basically benchmark LIBOR. THey are quoted at a discount to parity (e.g. a price of 95 on the 3 month eurodollar contract implies 5% interest rate). So when you buy eurodollar futures you want the price to head to 100 (0% interest rates), therefore being long the future means you are short rates
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