If you forecast that interest rates are likely to decrease over the next several years, you might sell a T-bond futures contract or buy an interest rate cap to take advantage of your expectations.

Question

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Selling a T-bond futures contract would be a strategy used if you expect interest rates to increase, not decrease. If you expect interest rates to decrease, you might buy a T-bond futures contract instead, as bond prices typically rise when interest rates fall. An interest rate cap could be used to hedge against rising interest rates, not to take advantage of falling rates.

If You Forecast That Interest Rates Are Likely to Decrease