Key points
- Shows where traders expect rates to be.
- OIS curve often diverges from Fed dots.
- Used to price FOMC meeting outcomes.
Example
If 3x6 OIS trades 40 bps below the current effective funds rate, traders are pricing multiple cuts within the next three to six months.
In history
In March 2023, after Silicon Valley Bank failed, OIS markets swung within days from pricing further rate rises to pricing cuts later that year, while the Fed was still signalling more rises.
Related terms