adjust duration with bond futures or interest rate futures？

[RoccoLee]

I see on the CFAI practice question says that we can buy interest rate contracts to increase the portfolio duration.

But can we buy bond futures to increase the portfolio duration? If yes, what’s the logic behind?

[S2000magician]

Buying (i.e., taking the long position in) bond futures contracts increases your dollar duration by the dollar duration of the futures contracts. When you add that to the dollar duration of your existing portfolio and divide by the market value of your existing portfolio, you get a higher (modified or effective) duration.

[RoccoLee]

@S2000magician

Buying (i.e., taking the long position in) bond futures contracts increases your dollar duration by the dollar duration of the futures contracts. When you add that to the dollar duration of your existing portfolio and divide by the market value of your existing portfolio, you get a higher (modified or effective) duration.

What if I use interest rate futures to increase my dollar duration?

Should we buy or sell the interest rate futures contracts?

If the answer is to buy. Then I am confused about why we take the same action on interest rate futures contract and bond futures?

[cpk123]

a treasury bond future is an interest rate future … per google.

An interest rate future is a financial derivative (a futures contract) with an interest -bearing instrument as the underlying asset. It is a particular type of interest rate derivative. Examples include Treasury-bill futures , Treasury-bond futures and Eurodollar futures.

[RoccoLee]

@cpk123

a treasury bond future is an interest rate future … per google.

An interest rate future is a financial derivative (a futures contract) with an interest -bearing instrument as the underlying asset. It is a particular type of interest rate derivative. Examples include Treasury-bill futures , Treasury-bond futures and Eurodollar futures.

So they are the same thing? LOL.

[AmruthSundarkumar]

FYI…Interest rate futures contracts can be split as - STIR Futures (Short Term Int Rate Futures) which include Eurodollar Futures, Fed Funds Futures, T-Bill futures etc. and Bond Futures (Underlying - 5, 10, 15, 20, 30 yr bonds etc. with certain minimum maturity characteristics for the respective underlying). The dynamics with respect to directional changes in rates are the same for either. To add to the trouble there’s also another one called Deliverable Swap Futures (DSFs).

In general the term ‘interest rate futures’ is considered to be STIR Futures. That’s why the question is quite safe by mentioning it as ‘interest rate contracts’ and not ‘interest rate futures’ or ‘bond futures’. And yes, buying an interest rate contract (either STIR or Bond futures) increases portfolio duration since you’re going long the duration/buying duration of the futures contract.