So I have a portfolio of Govt. bonds that I'm trying to hedge with futures. Let's take one of the bonds out of the portfolio as an example.
In bloomberg, every bond and its future counterparts has a "Risk" rating. There are only 2 futures available, a 3Y and a 10Y.
Bond A - maturity 08/01/23 - has a risk rating of "4.278"
Future 3Y - Risk Rating of "2.42"
Future 10Y - Risk Rating of "10.66"
How do I get to a maturity-matched blend of the risk rating for the futures available?
I want the correlation of the bond returns and the blended future returns to be high.