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January 21, 2010 |
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| Market Expectations of Eurozone HICP | ||||||||||||||||
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The latest Eurozone Harmonized Index of Consumer Prices excluding tobacco ("HICP") number was released by the European Statistical Institute ("Eurostat") on January 15, 2010. The HICP for December 2009 was 108.61. Rounding values to the closest second decimal, this represents a year-on-year increase of 0.80% from the December 2008 HICP number. Based on activity in the CME Eurozone HICP futures contract at the close on Thursday, January 14, 2010, the market was expecting year-on-year ("Y-o-Y") inflation as implied by the December 2009 HICP number to be 1.00%. Looking ahead, the chart below presents market expectations for future inflation over the coming year as implied by the CME Eurozone HICP futures contract. The implied Year-on-Year rates, the dotted green line below, are based on market prices as of 3:00 pm London time on January 15, 2010. Please note that the implied inflation rates are rounded to the closest second decimal value.
CME Eurozone HICP futures contracts have been trading on the CME Globex platform since September 2005. CME now offers implied spread functionality for all CME Eurozone HICP futures and futures spreads. This functionality has been available for a number of years on Globex for CME Eurodollar futures and the same principals apply to CME Eurozone HICP futures. CME Globex Implied Prices are a way to provide CME customers with greater market liquidity and improved prices for Eurozone HICP futures. Bids and offers in individual futures contracts are automatically combined by CME Globex to create additional liquidity in spread contracts, often at improved prices. These are called "Implied In" prices. Existing bids and offers in spread contracts are combined with bids and offers in individual futures contracts to create additional liquidity in other futures contracts. These are called "Implied Out" prices. For market makers, implied prices allow relatively low risk spread contracts to generate liquidity in the underlying contracts. For market takers, implied prices mean more liquidity and better prices, whether trading spreads or the underlying contracts. For more information, see the Implied Price Functionality Overview. This web page details how implied pricing works for CME Eurodollar futures on Globex, but the system is essentially the same for CME Eurozone HICP futures.
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