Forward Rate

Just because we’re always investing in the present doesn't mean we don't stop thinkin' about tomorrow (ask Fleetwood Mac for details).

The forward rate is the expected future interest rate (for bonds) and also the expected future exchange rate (for currency exchange).

Forward rates are basically guesstimates of future rates; they make no promises. It’s tough since sometimes markets climb unexpectedly...or worse, drop unexpectedly.

For big corporations that don’t want to deal with fluctuating profits...just because of fluctuating interest rates across borders...they’ll make forward exchange contracts to lock-in current rates. These contracts make it so that, when the time comes, it doesn’t matter what the market says: the interest rate is whatever was on the contract, set in the past.

Let bygones be bygones, as investors like to say. Sometimes.