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For speculators looking to place bets on the direction of interest rates (such as hedge funds), interest rate swaps are an ideal instrument.
FORBES: Demystifying The Swap Market
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Careful debt-management strategies that avoid short-term borrowing or the bunching of maturities and hedge against interest-rate or exchange-rate swings should come high on the agenda.
ECONOMIST: Down but not out
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So how can individual investors hedge their portfolios against interest rate risk?
FORBES: Rising Interest Rates Don't Have To Bring You Down
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Banks will still be able to trade swaps to hedge risk and trade interest rate or foreign exchange swaps, but dealing in riskier swaps transactions must still be moved into affiliates.
FORBES: As Senate Passes Financial Reform, Wall Street Braces For What Comes Next
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They hedge their own exposure to interest-rate risk through derivative contracts.
ECONOMIST: Freddie Mac and Fannie Mae
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Another reason demand for the long bond has been so voracious is that a lot of investment banks still use them to hedge their corporate-bond positions and interest-rate swaps (between fixed- and floating-rate obligations).
ECONOMIST: Bond bombshell
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Goldman's prime brokerage business, which assists and finances hedge fund stock purchases, has been racking up fees and interest rate spreads.
FORBES: When a hedge fund attacks a company, guess who wins twice?
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GlobeFunder allows borrowers to appeal for funding, determines an interest rate range, and then working with its partners--institutional investors and hedge funds--finds out whether there's enough interest in the loan to fund it.
FORBES: Banking 2.0: New Capital Connections For Entrepreneurs
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According to the Association of Corporate Treasurers, the vast majority of interest rate derivatives involve financial companies, such as banks, investment firms, insurers and hedge funds.
BBC: Libor scandal: Who might have lost?
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The carried interest loophole that allows hedge fund managers and private equity investors like him a 15% tax rate on most of their earnings?
FORBES: Reality Check: A Women's View of the Economy on the Eve of the Election