Fixed Income manager believes the Fed will raise rates at next month’s meeting and anticipates inflationary pressures will erode the value of the portfolio. Which of the following would best hedge the risk? a - Enter into multiple fixed rate payer swaps matching individual bond maturities and notional values b- Enter into multiple fixed rate reciever swaps matching individual bond maturities and notional values c-Enter into a fixed rate reciever swap matching the portfolio duration and total notional value.
I say you want to be short duration thus in a fixed rate payer swap answer a. Stalla says its b.
I would have said A also. If you expect rates to go up why would you enter into a swap where you receive fixed and pay floating?
Thanks. Just double checking to make sure Im not missing somehting