Where are interest rates headed?

While we often see opinions about interest rates given by various commentators, I think the most telling indication is often that of the market, the point at which rates are settling at in prices is available at any time by looking at the Euribor Yield Curve, below is the chart for today.

The idea that rates will probably stay c. 1% until well into 2010 is only partially priced in, you can see the yield curve crossing the 1% mark at 6 months (which would be May 2010) – this however, is the Euribor and does have margin factored in, currently the margin over ECB is c. 25 basis points so the 1% base would cross when the graph above is at c. 1.25%. and that is the part that brings us to the latter half of 2010. The yield curve is live and dynamic so it could change at any time, either flattening or inverting. The reasoning behind where interest rates are going is a science in itself, and one that …

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