Interest Rates

Monetary policy is a set of tools used by central banks, like the Federal Reserve, to manage the money supply, control inflation, and promote economic stability. It works through mechanisms such as interest rate adjustments, open market operations, and reserve requirements to influence borrowing, spending, and investment. Central banks also play a crucial role in stabilizing currency exchange rates, supervising banks, and providing liquidity during financial crises.

Bonds are debt instruments issued by governments and corporations, offering fixed interest payments to investors until maturity. Their prices fluctuate based on interest rates, leading to an inverse relationship with yields. Bond investments are influenced by factors like the yield curve, credit quality, and ratings from agencies such as Moody's and S&P, which assess the likelihood of repayment.

Investment portfolios balance capital appreciation from equities with income from fixed-income products. The 60/40 rule suggests a mix of 60% equities and 40% fixed income, but this allocation depends on factors like risk appetite, age, and monetary policy outlook. Investors can hedge risks using protective options, government bond futures, and interest rate futures, which help manage exposure to market fluctuations.

Interest rate traders can now execute Pack and Bundle orders for CME Group SOFR futures contracts. This video explains how to add contracts to a watchlist and how to create an order.