Interest rate futures

This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.

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December 5, 2015 at 7:16 pm #287974
kasia
Participant
- Topics: 24
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Dear John,

Could you please explain to me why this statement is incorrect?

‘Borrowers hedging against an interest rate increase will buy interest rate futures now and sell them at a future date’

I thought this statement would be true…
December 5, 2015 at 8:03 pm #287987
John Moffat
Keymaster
- Topics: 57
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No it is not true.

As interest rates increase the futures price falls. Therefore you will sell futures now and buy them back later.

You need to watch my free lectures for a detailed explanation.
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