An endowment own $150M of bonds that has a modified duration (MD) of 8.5. Over the next 6 months they want to decrease the MD to 6.0. They can use Treasury futures contracts that mature in 6 months that have a current nominal value of $0.25M and have MD of 10. The yield beta is 1.06.

1) Recommend the futures trade needed to change the MD

2) At the end of the period treasury rates are up 0.5% (50 basis points), the bond portfolio is worth $141.74M and each futures contract is trading at $0.2375M. What is the dollar return on the partially hedged position?