Currently (March 20, 2021), your portfolio consists of 1,000 Treasury 1 3/4% September 15, 2030 bonds. If you are bearish, believing that the 10-year Treasury yield would rise by 100 basis points (from the current market yield of 2%) in the next three months, what would you do to hedge against the rising interest rates with June 2021 10-year T-note futures (symbol: ZN)? If indeed three months from now the 10-year Treasury yield rises by 100 basis points, describe in detail how your futures position would protect the market value of your portfolio. 

If not, what is the result of your hedging strategy?

Answer rating: 100% (QA)

If you are bearish on interest rates and believe that the 10year Treasury yield will rise by 100 bas... View the full answer