Before getting into some short term interest rate products, let's first explore forward interest rates. A key concept in short term interest rate markets.

A forward interest rate is the market's projected interest rate between two points, both of which are in the future.

For example, the forward rate between time T1 and T2 represents the implied rate for borrowing or lending during that future period based on today's market prices. In simple terms, we are not talking about the rate for borrowing from today. We are looking at what the market projects the rate to be at a later date.

These projected forward rates form the basis for several widely used financial instruments, including forward rate agreements, short term interest or STIR futures contracts, and single period overnight index swaps, sometimes just called SPSs.

Each of these instruments allows market participants to lock in for borrowing or lending or to speculate on interest rates for a specific period in the future, but they differ in how they're structured and where they're traded.

Forward rate agreements or FRAs are over-the-counter products and they're quoted on traditional interbank offered rates. For example, your EURIBOR. Futures, on the other hand, are exchange traded and can reference either EURIBOR rates or newer risk free rates or FRS like SOFA, SONIA, or ESTR.

Finally, there are single period OIS swaps, which are also traded over-the-counter. These are the RFR based equivalent of FRAs and serve the same purpose locking in a forward rate for a future period.

Even though these instruments are structured differently, they all serve the same function. They allow traders and investors to access and manage forward interest rates.

So who uses them? Generally speaking, speculators tend to prefer the liquidity and standardization of futures. Hedges on the other hand, often go for the flexibility of OTC products like FRAs and single period swaps. That said, even speculators sometimes opt for OTC contracts when they need to target very specific start or end dates that aren't available with standardized futures.

Of course, hedges also use interest rate futures when the standard contract dates match their needs.

The key takeaway is that forward rates aren't just theoretical. They're actively traded every day helping market participants to manage risk and express their views on where they believe interest rates are headed.