What Is an Interest Rate Forward Curve?
A forward curve shows the interest rates the market implies today for borrowing over future periods. Each point on it is a forward rate: on 6 October 2026, for example, the SONIA curve priced 3-month SONIA at 4.76% for a period starting in October 2027, against 3.93% for the 3 months starting that day. Forward curves are what swaps are priced from, how floating-rate interest is projected in a model, and how existing hedges are valued.
All rates in this guide are from BlueGamma curves at the London close on 6 October 2026, unless stated otherwise.
What is a forward curve?
A forward curve plots forward rates against the date each period starts. For an interest rate benchmark such as SOFR, SONIA or Euribor, each point answers one question: what rate can be locked in today for a period that starts on that future date?
The same curves as numbers, with each benchmark's latest fixing for comparison:
| 3-month forward rate starting | SOFR (USD) | SONIA (GBP) | €STR (EUR) | 3M Euribor (EUR) |
|---|---|---|---|---|
| Latest fixing, 6 Oct 2026 (overnight; 3M for Euribor) | 3.90% | 3.73% | 2.44% | 2.60% |
| End-January 2027 | 4.36% | 4.36% | 2.84% | 3.04% |
| End-April 2027 | 4.61% | 4.61% | 3.05% | 3.25% |
| End-October 2027 | 4.75% | 4.76% | 3.17% | 3.36% |
| End-October 2028 | 4.77% | 4.70% | 3.21% | 3.35% |
| End-October 2031 | 4.80% | 4.79% | 3.26% | 3.38% |
| End-October 2035 | 5.09% | 5.30% | 3.63% | 3.70% |
Two things stand out. First, every curve slopes up from today's fixing, so the market is pricing higher short-term rates over the next year in all three currencies. Second, 3-month Euribor sits above €STR at every point, by about 20bp for periods starting in 2027 and narrowing to under 10bp by 2035: Euribor is a term bank rate and €STR an overnight risk-free rate, and the gap between them is a basis spread the curve carries all the way out.
For today's curves, see the SOFR forward curve, SONIA forward curve and Euribor forecast, or the full forward curves hub.
How to read a forward curve
Take one point: the 3-month SONIA forward rate for 6 October 2027 to 6 January 2028 is 4.76%. It means that, on 6 October 2026, the swap market priced borrowing at SONIA over those three months at 4.76%. A business with a SONIA loan for that period can lock in roughly that rate with a swap today, before any credit or execution charges.
That rate comes straight from the curve's discount factors. A discount factor is the value today of 1 paid on a future date, and the forward rate between two dates is the rate that links them:
F = (DF1 / DF2 − 1) / τ
| Input | Value |
|---|---|
| DF1, discount factor to 6 Oct 2027 | 0.957543 |
| DF2, discount factor to 6 Jan 2028 | 0.946197 |
| τ, accrual fraction (92 days / 365) | 0.252055 |
| F = (0.957543 / 0.946197 − 1) / 0.252055 | 4.76% |
The shape of the curve is the market's pricing of where the benchmark is heading. An upward slope, like the one above, prices rate rises; a downward slope prices cuts; and a flat curve prices little change. Our guide to discount factors covers the other side of this calculation.
Forward rates vs fixings, par and zero rates
The same curve can be quoted in four ways, and mixing them up is the most common source of confusion:
| Rate | What it is | SONIA, 2 years |
|---|---|---|
| Overnight fixing (today's rate) | Today's published benchmark rate, for one day | 3.73% |
| Par swap rate | The fixed rate on a swap starting today that has zero value | 4.63% |
| Zero rate (annual compounding) | The single rate that discounts a payment at that date back to today | 4.63% |
| Forward rate | The rate for a period that starts in the future (here, years 1 to 2) | 4.83% |
The relationship follows from how they are built. A zero rate is the compounded average of the forward rates up to its maturity, and a par rate is a discount-weighted average of them, so while the curve rises the forward rate at the end of a period is above both, and where the curve turns down the forward falls below them. The SONIA curve on 6 October 2026 shows both:
| Maturity | Par swap rate | Zero rate (annual) | Discount factor | 1-year forward rate ending at this point |
|---|---|---|---|---|
| 1 year | 4.43% | 4.43% | 0.9575 | 4.43% |
| 2 years | 4.63% | 4.63% | 0.9133 | 4.83% |
| 3 years | 4.68% | 4.69% | 0.8713 | 4.79% |
| 5 years | 4.72% | 4.73% | 0.7937 | 4.81% |
| 10 years | 4.92% | 4.96% | 0.6162 | 5.44% |
A yield curve is not a forward curve: it shows yields or par rates by maturity, from which forward rates are derived. The yield curve shapes guide covers how to read its slope.
Is a forward curve a forecast?
No. A forward rate is the rate you can lock in today, which reflects the market's expectations plus a risk premium that can be positive or negative. It is a sensible market-implied central case for a budget or a model, but it is not a prediction, and it moves every day as expectations change.
The 3-month rate for October 2026 shows how much it can move. This is what the curve priced for that same period at four points over the past two years:
| Priced on | SONIA 3M, Oct 2026 to Jan 2027 | SOFR 3M, Oct 2026 to Jan 2027 |
|---|---|---|
| 30 September 2024 | 3.41% | 2.98% |
| 31 March 2025 | 3.82% | 3.40% |
| 30 September 2025 | 3.61% | 3.12% |
| 31 March 2026 | 4.33% | 3.66% |
| Priced on 6 October 2026 (3-month swap; SOFR runs 8 Oct to 8 Jan) | 3.93% | 4.02% |
Against today's price for the same period, the curve two years earlier priced SOFR about 104bp below it, and six months earlier it priced SONIA about 40bp above it, after the energy shock in March 2026 pushed sterling rate expectations up (see our SONIA year in review). This is why hedging decisions are usually framed as locking in a known cost, not as a bet on where rates will be.
Currency forward curves
An FX forward curve shows the exchange rate you can lock in today for a future date. Unlike an interest rate curve, it is not driven by expectations of the exchange rate: it is set by the interest rate gap between the two currencies, a relationship called covered interest parity. The currency with the higher interest rate trades at a forward discount, because holding it earns more interest in the meantime.
For GBP/USD on 6 October 2026, with 1-year USD rates slightly above GBP rates:
| Input | Value |
|---|---|
| GBP/USD spot (as used for the forward quote) | 1.3271 |
| 1-year SOFR swap rate (Act/360) | 4.468% |
| 1-year SONIA swap rate (Act/365) | 4.434% |
| Forward implied by the rate gap, 365 days from spot | 1.3284 |
| Market 1-year forward | 1.3280 |
Forward = Spot × (1 + rUSD × d/360) / (1 + rGBP × d/365)
The market forward is 8 pips above spot, and within 4 pips of the forward the two interest rates imply; the remaining few pips reflect the cross-currency basis and small timing differences between the quotes. See the live GBP/USD forward curve, and our guide to forex forecasting for long-dated cash flows.
How a forward curve is built
A forward curve is not drawn from forecasts or analyst views. It is bootstrapped from market prices at a single point in time, so that the curve reprices every instrument it was built from.
| Curve | Short end | Middle | Long end |
|---|---|---|---|
| SONIA | Overnight fixing (3.73%) | OIS swaps: 3M 3.93%, 1Y 4.43% | OIS swaps: 5Y 4.72%, 10Y 4.92%, 30Y 5.22% |
| 3M Euribor | 3M fixing (2.60%) | Short swaps vs 3M Euribor: 6M 2.82%, 9M 2.98%, 1Y 3.10% | Swaps vs 3M Euribor: 2Y 3.27%, 5Y 3.37%, 10Y 3.50% |
The steps:
- Collect quotes as close to one timestamp as possible. Fixings anchor the very short end, then FRAs, futures or short-dated swaps, then swaps out to 30 years and beyond. Mixing quotes from very different times builds an inconsistent curve.
- Bootstrap the discount factors. Starting from the shortest instrument, solve for the discount factor at each maturity so that each instrument has zero value at its quoted rate, using the discount factors already found for earlier dates. For a term rate like Euribor, the projection curve is solved with the €STR discount curve held fixed.
- Interpolate between the quoted maturities. The method matters for forward rates: a cubic spline on log discount factors keeps forwards continuous, log-linear interpolation gives flat forwards between quoted points, and linear interpolation on zero rates can leave saw-tooth forwards.
- Use separate curves for discounting and projection. Since the 2008 financial crisis, collateralised cashflows are discounted on an overnight (OIS) curve such as SONIA or €STR, while a term rate such as 3M Euribor is projected from its own curve. The gap between the €STR and 3M Euribor forwards in the first table is this second curve at work.
BlueGamma builds its curves this way, with QuantLib and log-cubic interpolation on discount factors, from market quotes that update throughout the day; our methodology page covers the details.
What happened to LIBOR forward curves?
LIBOR forward curves no longer exist, because LIBOR has ended. Most settings stopped at the end of 2021, the main US dollar settings on 30 June 2023, and the last synthetic sterling and dollar settings on 31 March 2024 and 30 September 2024. Their replacements are overnight risk-free rates: SOFR for US dollars, SONIA for sterling, and €STR in euros, where Euribor also continues alongside it. A model that used a LIBOR forward curve now uses one of these; see Term SOFR vs compounded SOFR for how US dollar loans moved over.
How forward curves are used
| Use | What the forward curve provides |
|---|---|
| Pricing a new swap | The fair fixed rate: the rate at which the fixed leg matches the projected floating leg, discounted on the curve |
| Projecting floating interest in a model | The market-implied rate for each interest period, for debt sizing and covenant tests |
| Valuing an existing hedge | Projected floating payments and discount factors for the mark-to-market |
| Forward-starting hedges | The rate for a swap that starts at financial close or drawdown, see forward-starting swaps |
| FX hedging | Forward points for each future date, from the interest rate gap |
Getting forward curves
BlueGamma publishes forward curves for SOFR, SONIA, €STR, Euribor and around 35 currencies, updated through the trading day. You can download them from the web app, pull them into a model with the Excel Add-in's =BlueGamma.FORWARD_RATE() function, or request them from the API. Start a free 14-day trial, no card needed.
Rates shown are BlueGamma mid-market curves at the London close on 6 October 2026, for illustration. They are not investment or hedging advice.
Frequently Asked Questions
What is a forward curve in simple terms?
A forward curve shows the interest rate the market implies today for each future period. Each point is the rate you could lock in now for borrowing over a period that starts on that future date, so the curve's shape shows whether the market is pricing rates to rise, fall or stay flat.
Is a forward curve a forecast of interest rates?
No. A forward rate is the rate that can be locked in today, which combines the market's expectations with a risk premium that can be positive or negative. It is a reasonable market-implied central case for budgets and models, but it changes every day and often differs from the rate that is eventually fixed.
What is the difference between a forward curve and a yield curve?
A yield curve shows yields or par rates for loans or bonds that start today and mature on different dates. A forward curve shows rates for periods that start in the future. Forward rates are derived from the yield curve's discount factors, and they sit above the yield curve when it slopes up.
How is a forward rate calculated?
From two discount factors on the same curve: the forward rate between dates 1 and 2 is (DF1 / DF2 − 1) divided by the accrual fraction between the dates. On 6 October 2026 this gave 4.76% for 3-month SONIA from October 2027 to January 2028.
What is a forward swap curve?
A forward swap curve shows the fixed rate for swaps that start on future dates rather than today, for example a 5-year swap starting in one year. It is built from the same forward curve and is used to price forward-starting hedges.
What replaced the LIBOR forward curve?
Overnight risk-free rate curves: SOFR for US dollars, SONIA for sterling and €STR for euros, with Euribor continuing alongside €STR. LIBOR's last synthetic settings ended on 30 September 2024.
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