An Interest Rate Future is an agreement to buy or sell a debt instrument at a future date for a price fixed today.
The underlying security for IRFs is usually a government bond or a treasury bill. In India, National Stock Exchange and Bombay Stock Exchange offer trading in interest rate futures. You could use your Kotak Securities online account to avail the facility of trading through both exchanges.
Tax-free bonds have emerged as a highly popular investment option among investors.
Here’s a look at some of its benefits:
It is a good hedging mechanism. In India, interest rates are high due to high inflation. However, at some stage, they could go down too.
It may be a good idea to protect your borrowing costs against future movements in interest rates.
There is no Securities Transaction Tax (STT). This makes hedging a reasonably efficient process.
The real-time dissemination of prices means there is greater transparency in trading.
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