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Possible shortcut for remembering some swaps stuff

Something I've deduced today:

If you are long a FIXED rate bond, THINK BOND VALUE. In other words, you want bond value to go up, you want interest rates to go down, and for purposes of hedging you want to find a product that will provide a payoff when rates go up. Vice Versa for short fixed rate bond.

If you are long a FLOATING rate bond, THINK INTEREST RATES. In other words, you want interest rates to go up, you want bond value to go down, and and for purposes of hedging you want to find a product that will provide a payoff when rates go down. Vice Versa for short floating rate bond.


This logic has worked without fail in about a half dozen problems I did today. Can someone confirm or add light to this or help me figure out when this wouldn't work?

any takers?

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If you are the fixed rate payer (floating rate receiver) - you are in essence long a floating rate bond - thus your position in the swap will increase when rates rise.

If you are the floating rate payer (fixed rate receiver) - you are long a fixed rate bond - thus your position in the swap will increase when rates fall.

This is how I remember it.

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yea that agrees with my logic. the problem is when they dont tell you if youre paying or recieving what and they just say you are "short the floating". my logic allows you to take that and understand if youre paying or receiving the floating based on what you want to happen to rates.

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