Interest Rate Future

DEFINITION of 'Interest Rate Future'

A futures contract with an underlying instrument that pays interest. An interest rate future is a contract between the buyer and seller agreeing to the future delivery of any interest-bearing asset. The interest rate future allows the buyer and seller to lock in the price of the interest-bearing asset for a future date.

BREAKING DOWN 'Interest Rate Future'

Interest rate futures can be based on underlying instruments such as:


Because interest rate futures contracts are large in size (i.e. $1 million for Treasury Bills), they are not a product for the less sophisticated trader.

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