Question

financial institution that maintains some Treasury bond holdings sells Treasury bond futures contracts. If interest rates increase, the market value of the bond holdings will ____ and the position in futures contracts will result in a ____.

Answer 1

Financial institution that maintains some Treasury bind holdings sells treasury bong futures contracts. If the interest rates increase, the market value of the bond holdings will decrease and the position in futures contracts will result in a gain.

When ever interest rates in market goes up, the current value of the bonds decrease and in this case the financial institution can book a gain by selling bond treasury futures.

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