# How to hedge or profit from interest rate rising?



## SPC100 (4 Mar 2011)

I feel the ecb rates are going to increase, and I feel that mortgage rates in Ireland are going to increase.

If this transpires, is there some method I can use to hedge against or profit from this?


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## tvman (4 Mar 2011)

Short German Govt Bonds ("bunds")

fixed income securities like bonds fall in value when market interest rates rise


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## Almost Broke (8 Mar 2011)

tvman said:


> Short German Govt Bonds ("bunds")
> 
> fixed income securities like bonds fall in value when market interest rates rise



+1

Should you have money to invest right now,,, There is where to put it


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## SPC100 (10 Mar 2011)

Thanks for suggestion.

I would prefer a more direct solution, e.g. ecb (or even better irish variable rate) rises by .5%, I get a payment of x

Maybe some spreadbet  or option could achieve this?


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## Chris (10 Mar 2011)

marketspreads.ie have some Euribor interest rate futures that you might be able to use, and I'm sure other spread betting companies do too. This is something I am currently looking at as well.
Note: I have no affiliation with marketspreads other than being a customer.


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## minion (18 Mar 2011)

It would have to be something that you could keep rolling over indefinitely for a minimal cost.
I would have thought one of the spread bet companies would track the ECB rates.


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## wbbs (19 Mar 2011)

How do you buy those German bonds?


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## minion (19 Mar 2011)

wbbs said:


> How do you buy those German bonds?



You should find them on most financial spread betting sites.

But I cant find a product that would suit.  You can get Euribor to Dec 2011, but what you need is ECB to the end of your mortgage term, or at least a cheap rollover.


The best way is financial spreadbetting, so you can gear up.  Otherwise you'll have to invest the same amount invested thats outstanding on your mortgage.  Sure then you might as well just pay off your mortgage with it.

In a nutshell.
For the cost of rolling over (which should be small).  You bet enough on the ECB rate increasing. to cover what the extra cost on your mortgage would be.  

The idea being that if the ECB rate increases you win the amount your mortgage is going up by.  

But if the ECB rate goes down you lose the amount you would save on your mortgage.  

So it all more or less balances out.  You dont care whether you win or lose, because you should always be up by more or less the same as you are down on the other side of the equation.

Maybe ring the spread companies and ask them if they have such a product.  Im sure they do.  The demand would be massive.

Example 

[broken link removed]

http://www.financial-spread-betting.com/strategies/Spread-hedging.html


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## Chris (21 Mar 2011)

wbbs said:


> How do you buy those German bonds?



For this scenario you want to sell them (i.e. short) not buy them. Most spreadbetting companies offer German bond futures.


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