NORMAL MARKET

The deferred months' prices for futures contracts are normally higher than the nearby months' to reflect the costs of carrying a contract from now until the distant delivery date. Thus, a "normal market," for non-interest rate futures contracts, exists when the distant months are at a premium to the nearby months. For interest rate futures, just the opposite is true. The yield curve dictates that a "normal market" for interest rate futures occurs when the nearby months are at a premium to the distant months.