hedge against interest rate rise 2004

[XBenX]

Originally posted by XBenX
everyone is just assuming he would refinance

why not do that....

the other option for hedging (without refinancing) lies in the bond market - but i dont really think it is a good option

ok, my bluff has been called, im too helpful for my own good

the answer is above....

/me puts down the spoon


ASK a better question you still havent done that

 

[Bill.L]

If your that certain that rates will rise then sell a 10 year bond futures contract(or several). The futures game on bonds is buy if you think rates are going lower and sell if they are going higher. However you lose big if you are wrong.

bye

 

[Jamie]

Hi tonyc00

Welcome to the forum... 2 days and youre already telling us we dont live up to your expectations... You must know my ex-girlfriend...

Ill try a little harder...

What do you define as a hedge?

Now, you mention your loans but not your exposure...

You dont mention why but... why are you sure of the int. rate rise?

If you are so certain, why not lock in 5 years at the current rate (around std var.)?

If you are so sure of the rate rise, arent the break costs simply the real cost of "doing business"?

What are the break costs of your current loan?

Are they all residential?

Are your loans cross-collateralised?

How are your properties performing? (If they are all +cashflow by a fair margin, then the rise shouldnt worry you too much... if all 5 are -geared then your approach will be different?

Jamie

 

[XBenX]

right on Bill L

jamie - i find it amazing that someone who has economist listed in their profile doesnt know about the bond market / interest rate interactions - maybe i should go lecture at harvard ? thats where you studied right, whats your background ?

<edit> deleted more petty remarks

you have an answer now, welcome to the forum - hopefully you can contribute

 

[Ajax]

Can someone a bit more financially savvy than me explain interest rate caps?

Assume I have $1m in borrowings all at variable rates, believe interest rates will rise over the next 5 years and am willing to pay a premium upfront to a merchant bank to cap the rate (and effectively hedge the interest payable on my variable loan for 5 years without fixing).

I note that premiums for interest rate caps are quoted daily in the Financial Review. Does anyone here hedge their interest payable in this way? Do you have difficulty negotiating margins with the merchant banks?

 

[Big Pete]

Hi Tony

any luck with finding a private interest rate swap .. I beleive banks arrange these for corporates .. and would be interested to know if you've found any 'deal makers'

regards