Welcome to Interest Rate Analysis, the branch of fundamental analysis that studies what moves interest rates so you can judge where the prices of interest-rate futures are headed. The unit rests on one relationship the exam tests relentlessly: interest-rate futures prices move opposite to interest rates. Once that is fixed, everything else, the yield curve and the government policies that push rates around, becomes a reasoning problem, not memorization.
Exam Weight: Part 1 spans ~71% of the exam across Chapters 1-7 combined; the National Futures Association (NFA) does not publish per-unit weights.
What You'll Learn
In this unit, you'll cover:
- Yield Curves: What a yield curve is, its three shapes (positive/normal, inverted/negative, and flat), which way each one slopes, what each shape signals about the economy, and the all-important inverse relationship between interest rates and interest-rate futures prices
- Effects of Governmental Policies: How the Federal Reserve (the Fed) steers short-term rates with its three monetary-policy tools, how fiscal (taxing and spending) policy feeds through to rates indirectly, and how to chain each policy move all the way to a futures-price direction
Why This Matters
Series 3 candidates trade and advise on interest-rate (financial) futures, contracts on Treasury notes, Treasury bonds, and the Secured Overnight Financing Rate (SOFR), whose prices are driven entirely by where rates go. Two ideas run through the whole unit:
- The yield curve is a snapshot of short-term rates versus long-term rates, and its shape carries an economic signal (expansion, recession warning, or transition)
- Rates and interest-rate futures prices move in opposite directions, so anything that pushes rates up pushes those futures prices down, and anything that pushes rates down lifts them
Watch one signature relationship the whole way through: rates up means interest-rate futures prices down, and rates down means prices up. It is the single most flippable fact in the unit, so every yield-curve shape and every policy move ultimately routes back to it.
Let's start with the shape that tells you where rates stand right now: the yield curve.