Let's look at short term interest rate futures or STIR futures for short.

STIR futures are exchange-traded, cashsettled forward contracts on money market interest rates. That includes both IBOR based contracts like EURIBOR futures and more recently RFR futures like SOFR and ESTR. Unlike FRAs, STIR futures are quoted in terms of price, not rate, and that price is defined as the futures price is equal to 100 minus the forward rate. So if the forward rate is 3%, the future's price would be 97. At first this might seem a bit backwards, but there's a clear reason behind this convention.

It's designed to make the future's price behave like a bond price. When interest rates go up, prices go down. When interest rates fall, prices go up. So holding a long position in a STIR future gives you exposure to falling interest rates. Just like being long a bond and being short a future gives you exposure to rising rates. This consistent rate price relationship makes it easier to understand and manage interest rate risk across different types of instruments.

But, and it's a big, but this convention often causes confusion when comparing STIR futures to FRAs. Buying a STIR future is effectively the same as selling an FRA and vice versa. So while the direction of rate risk is consistent with bonds, FRAs are the odd one out. They behave in the opposite direction. It's a useful thing to keep in mind, especially when switching between the two.