To hedge against a spot loss with a rise in interest rates (i.e., a fall in bond prices), a short futures position should be taken, and to hedge against a fall in interest rates (i.e., a rise in bond prices) a long futures position should be taken.

Question

Quizplus · Accepted Answer

A short futures position can help to offset losses in the spot market if interest rates rise and bond prices fall. Likewise, a long futures position can help to offset losses if interest rates fall and bond prices rise.

To Hedge Against a Spot Loss with a Rise in Interest