July 16, 2020 / 3:01 PM / a month ago

UK rate futures on track to close above 100 for first time

LONDON, July 16 (Reuters) - Sterling interest rate futures looked track to close above the 100 mark for the first time on Thursday, potentially an indication that investors are pricing in negative Bank of England interest rates next year.

As of 1440 GMT, short sterling contracts for late 2021 through to early 2022 stood above the 100 mark, up around 3 ticks on the day.

Short sterling contracts are priced as 100 minus the future expected interest rate in basis points, so a reading above 100 indicates investors are betting on negative rates in future.

Having depleted its conventional toolkit of policy measures, the Bank of England is reviewing the effectiveness of negative policy rates, although it has said they may be some way off and are by no means a certainty.

The Bank of Japan and the European Central Bank have cut rates below zero to deter banks from parking cash at the central banks and instead lend money to boost growth. (Reporting by Andy Bruce, editing by David Milliken)

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