The information content of 3-month Sterling futures

We examine 3-month Sterling futures contracts on Sterling 3-month LIBOR. We find no evidence to suggest that the price of the Sterling futures contract is not cointegrated with the 3-month Sterling LIBOR up to 3 months out. After that horizon the cointegration evidence is mixed and may suggest a lack of market efficiency. In general, market expectations tend to have a small bias and tend to overpredict the level of future LIBOR.