Cash Flow Hedging Strategies Simplified by the New Hedge Accounting Rules
Long term interest rates falling again along with the inverted yield curve present an opportunity for financial institutions to hedge floating rate liabilities on their balance sheet. Hedging against rising rates on floating rate debt has become a simpler strategy to pursue under the simplified hedge accounting rules. Under the new rules, qualifying cash flow relationships with some basis difference no longer produce income statement volatility and allows financial institutions to focus on the economics of a hedging strategy.