Eurodollar futures yields may be computed for any of the 40 quarterly maturities listed by the Chicago Mercantile Exchange. For example, the yield for the 10-year maturity used to compare Eurodollar yields with yields on 10-year Treasuries and nominal T-note futures is based on the geometric mean of the 40 rates through year 10. The yield produced by this method (described in “Getting to know TED,” August 2005) is directly comparable with the 10-year Treasury yield and 10-year T-note yield.
The yield on 10-year nominal T-note futures (see “All in the family,” March 2007) is computed based on the price listed by the Chicago Board of Trade. The price listed as a percent of $100,000 par value plus the number of 32nds of one percent of par is converted into a dollar amount. The dollar price is the present value of a 10-year note, coupon rate 6 %, with semi-annual interest payments of $3,000. The yield is the discount rate that makes the future cash flows of interest and principal equal to the current price.
