Question

Why would you buy Treasury bill futures contracts and as Eurodollar futures?

What is the possible use for each?

Answer 1

We would buy Treasury bills futures contracts and Eurodollar Futures

1. to hedge against intrest rate risks,

2. to protect the present and future cash positions of market participants.

3. To protect against price fluctuations.

4. Provides the expected future pattern of prices.

Treasury bill future market is very useful as it enables policymakers to asses the effects of policy changes on market expectations of future intrest rates.

Treasury bill future market plays a significant role for businessmen, financial managers, policy makers, and other economic analysts.

Eurodollar futures facilitates trading and enables intermediate maturities of four to five years. The yield curve of Eurodollar futures is equal to the U.S Treasury yield curve.

Eurodollar futures used as a hedging tool for Eurodollar rate fluctuations. Strategies associated with Eurodollar futures to hold long and short positions include bundles, butterflies, and pack.

Eurodollar futures are low risk investments.

Treasury bill futures contracts and Eurodollar futures are used

1. For speculating on short term intrest rates.

2. Hedging against changes in short term intrest rates.