I'm looking to hedge an interest rate differential sensitivity (the output from a statistical model of spot FX rates) on an intraday frequency. What is the best way to do it? Important factors include low cost and (near) around the clock trading.
Should I use FX futures (keep in mind the IRD sensitivity is around two years tenor) or should I look to use some combination of bond futures? Interest rate swaps might be another possibility but the minumum size might be too big for my requirements. If we were to think about majors (say EURUSD or USDJPY or AUDUSD), then how would these different possibilities stack up against each other when comparing trading costs and around-the-clock market availability?
Much thanks, Yug