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Interest rates futures

poonam jain (Trainee) (38 Points)

14 March 2014

Interest rate futuresbypoonam jainon08 March 2014dear expert, can u plz tell wat do u mean by selling interest futures? In a problem a manager needs funds after 2 months for 4 months and he is expecting interest rates would increase. The solution suggests that since manager is a borrower he must sell interest futures. I m not able to understand the interest rates futures can anyone plz help me wid dis?

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2 Replies

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 14 March 2014

yes dear this contract is for (2*6) type. the manager needs fund at 2 m for next 4 months. think what he will do so he can get what he desire. he should sell at futre to get fund. what he will sell....i.e sele futre. another way. if a person has now stock what he will do save himself from faling expacted interest rates in future. he should hedge interest rate by entering into future contract. i think now might be u can understand.

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CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 14 March 2014

Assume Mr. A is fund manager and he has sell future.and he needs funds at 2 M for 4 Months. Interpretation: It means the funds manager needs fund at 6 m(from now) to settle the transaction it means what his oresent status... He is a borrower at today and he has to pay the borrowed amount at 6 m hence he is worried about the increase in rates of interest hence he has enter into a sell future contract that will give him a right to received at future from which he will pay the loan in Spot market by doing this he will be hedged from any losses which may occur in future.