How are interest rate futures quoted?

Okay, so interest rate futures quotes. They’re weird, aren’t they? It’s like they’re speaking a different language or something. They use this thing called the IMM Index, and it’s basically backwards-land. Seriously, who came up with this? Instead of just saying “the interest rate is 6%,” which is perfectly understandable, thank you very much, they quote a price of 93. Ninety-three! Where did that come from? Well, it’s 100 minus the interest rate. So, 100 – 6 = 93. Why? I mean, why?

Makes my head spin a little, to be honest. Then, to make things even more interesting, let’s say the interest rate is a bit more specific, like 6.09%. The futures price then becomes 92.91. See? Backwards again! I remember when I first learned this, I was so confused. I was like, “Wait, what? How does that even work?” It took me a while to wrap my head around it, let me tell you.

And then, just when you think you’ve got it, they throw in another wrinkle. They start talking about “basis points.” Like, “Oh, the price is 9,291 basis points.” It’s the same thing as 92.91, just another way of saying it. It sounds so much more complicated than it needs to be, doesn’t it? It’s like they’re trying to make it sound super sophisticated, but really, it’s just a different way of slicing the same pie. So yeah, interest rate futures quotes…definitely a bit of a learning curve there.