interest rate volatility trading strategies

bond and/or treasury note futures in order to offset. But, in this article, well be viewing interest rates through a broader scope. However, it is commonly observed that for people applying this interpretation, the value of supplying currency is normally perceived as being positive. Variable rate category #1: Investment grade floating rate securities These instruments are issued by investment grade companies with credit rating of BBB- or higher. The rate of interest paid on these bonds can rise above or below the initial rate of interest stated when the security was issued.

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Irving Fisher 's concept of inflationary expectations, described in his treatise. Pros: The ability to generate higher income as rates rise and the fact that they should not fall in price if interest rates rise, much unlike many other types of bonds. The simplestand most drasticaction that an investor can take is to sell some of their current bond holdings and leave the proceeds in an interest bearing cash account or money-market fund which might benefit from a rise in interest rates. Again, there are reasons to believe that in this situation the risk-free rate may not be directly observable. Also, does not eliminate interest rate risk, and reinvestment rates may be lower. Alternative #3: A bond ladder, a bond ladder involves buying a series of individual securities (typically treasury bonds, municipal bonds, investment grade corporate bonds or even CDs) across a variety of maturity dates. But just as how financial markets fluctuate over time, so, too, do interest rates. The Wealth of Nations.