Eurodollar Contracts Quotes

Initially, the CD futures contract was the most popular. In fact, for the first four years, it had twice the open interest and trading volume as the Eurodollar futures contract. However, something happened that would change short-term interest rate futures forever. Continental Illinois National Bank, the seventh largest bank in the U.S., began suffering from liquidity problems. In the futures market, anyone receiving a delivery on the CD futures contract always received a Continental Illinois National Bank CD. When Continental Illinois collapsed in 1984, the CD futures contract was all but dead, lasting only two more years until 1986. What was bad news for the CD futures contract was good news for its sister contract, Eurodollar futures. The Eurodollar contract proved to be resilient during that banking crisis. Banks could still estimate their borrowing costs, and the survey method allowed banks to patch the holes in their yield curve when there was no actual CD issuance. The Eurodollar futures contract went on to become one of most successful futures contracts ever. The first cracks in LIBOR appeared during the Liquidity Crisis of August 2007. At the time, cash investors were unsure which banks were holding subprime debt and CDOs linked to subprime, so they stopped buying bank CDs altogether. Between August and September 2007, no bank could issue CDs with a maturity greater than one month. So, what do you do as a LIBOR submitter when you’re called at 11:00 AM and asked where you are issuing CDs? Ironically, banks did what they were supposed to do: they estimated. Of course, those estimates ended up being extremely low. The Liquidity Crisis of 2007 showed that the LIBOR survey method could break down during a major crisis.