How well do Futures contracts predict the actual interest rate? Take a look for yourself with this interactive visualization of USD LIBOR, GBP LIBOR and EURIBOR data from June 2008 to February 2011. You can also read a brief explanation at the bottom of the page.

  • The blue line Blue-line represents the historical data (monthly average)
  • The red line Red-line represents the rates predicted by the futures for a contract
  • Change the futures contract date using the slider Slider
  • Move your mouse pointer over a blue point Blue-dot to read the details
Interest rate index:
Selected month:
Historical rate (month avg):
Futures rate (end of month):
Prediction error:
This advanced interactive visualization works best with Google Chrome 9, Mozilla Firefox 4 or Microsoft Internet Explorer 9.

Explanation

The general point of this visualization is to show how good (or bad) professional investors - Wall Street - are at predicting future interest rates and economic cycles, to which interest rates are closely related.

Considering the time frame for which I could get the data, what we can specifically see from the graph is that the crisis of 2008 was completely unforeseen until the very last minute: moving the slider, you can see that before the gray line (which represents the day when the prediction was made by the market) gets very close first to the spike and then to the plunge in interest rates (blue line) the prediction (red line) shows no sign of what's to come.

After the plunge, it is interesting to notice how the market always underestimated the duration of the crisis: the red line is always getting up faster than what the blue line actually did.

You can read specific comments about what's happening in the visualization right above the graph.