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Post-Election Hedging Strategies

What does Donald Trump's victory mean for ALM hedging?

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Isaac Wheeler
Head of Balance Sheet Strategy
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Jordan Wank
Analyst
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Swap rates have climbed more than 80 basis points from their September lows, driven by anticipation and subsequent confirmation of Donald Trump’s presidential victory. For the first time in several years, we’re seeing declining rates hedges dominate our flows.

Three strategies stand out:

1. Forward-Starting Receive-Fixed Swaps

  • Hedge against lower rates without initial negative carry
  • Target flattest part of the curve to minimize initial expense
  • Forward-starting out of August 2025, approaching carry-neutral levels

2. Purchased Floors

  • Provide one-way downside protection
  • Could be standalone or used to protect existing pay-fixed swap gains
  • Can be ideal for institutions with two-way rate risk exposure

3. Pay-Fixed Swap Unwinds

  • Lock in current gains
  • Reduce exposure to falling rates
  • Consider alternatives:
    • Forward-starting receive-fixed swaps preserve current income
    • Interest rate floors preserve upside protection of existing swaps

Additional Resources

Don’t hesitate to get in touch with our team with any questions or for pricing on specific structures. Call 212-651-9050 or email us directly – [email protected].

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Isaac Wheeler
Isaac Wheeler is Managing Director and Head of Balance Sheet Strategy at Derivative Path, where he helps financial institutions structure and execute hedging transactions. Before joining the firm, Isaac spent five years at MFS Investment Management supporting execution of interest rate, currency and equity derivatives. He also spent time in MFS’s portfolio risk and technology teams. Isaac has a B.A. in Economics from Boston University.
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Jordan Wank
Jordan Wank is a Balance Sheet Hedging Associate at Derivative Path, supporting financial institutions in managing interest rate risk and optimizing their balance sheets. Jordan holds a Bachelor's in Economics from the University of Michigan.
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Disclaimer

The Term "Derivative Path" refers to affiliates, Derivative Path, Inc. and Derivative Path Hedging Solutions, Inc. Derivative Path, Inc. is headquartered in the State of California. Hedging advisory and execution services are provided through Derivative Path Hedging Solutions, Inc. (DPHS). DPHS is a Commodities Futures Trading Commission (CFTC) registered Introducing Broker (IB) and Commodity Trading Advisor (CTA) and member of the National Futures Association (NFA). This communication is for informational purposes only, is not an offer, solicitation, recommendation, or commitment for any transaction or to buy or sell any security or other financial product, and is not intended as investment advice or as a confirmation of any transaction. This communication is intended as an information resource only; Derivative Path has taken reasonable measures to ensure the accuracy of this communication. Any information contained herein is not warranted as to completeness or accuracy, and Derivative Path accepts no liability for its use or to update or keep any such information current. The content of this communication is subject to change at any time without notice.