duration management with interest rate futures

CFA Level III Fixed Income
#1

In reading 22 about duration management with interest rate futures, it is said that interest rate futures are commonly used in interest rate anticipation strategies, which involve reducing the portfolio’s duration when the expectation is that interest rates will rise and increasing duration when the expectation is that interest rates will decline.

What is the reason to reduce the portfolio’s duration when we expect interest rate to rise?

#2

Price change = -1 * Duration * Rate Change.

Rate rises - higher duration - Price Drops a lot.

So Duration needs to be reduced when rates rise - so that the Price change is minimized.

#3

got it. when interest rate rises, reduce the duration, so that price decrease less. thank you.

#4

+1

Nicely done, cpk.