Interest Rate Futures
Interest rate futures are derivative contracts based on interest-bearing instruments, such as bonds or loans. Like other futures, they grant the buyer the right and obligation to execute the contract terms at expiration. The value of interest rate futures moves inversely to interest rates: when rates rise, the futures’ price falls, reflecting lower value, and vice versa. This relationship allows traders to hedge against or speculate on interest rate fluctuations, leveraging the sensitivity of these contracts to changes in the underlying rates for strategic financial positioning.
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