I'm currently paying a 1.25% margin rate. This rate is based on the Fed Funds rate plus a margin. I would like to hedge against the possibility of this margin rate increasing. What is the best/cheapest way to do that? I have access to the futures market but not the market for swaps.
Some hedging ideas:
Short 2-year Treasury futures. Roll the futures every quarter and eat the cost of rolling since treasury futures are in backwardation. Also, I have to pay margin costs on the $2000 I borrow to put up as collateral for every contract I short.
Short Fed Fund futures. However, these don't go out very far. Also, I still have to pay margin costs on the money I borrow for collateral.
Any other ideas? Pros/cons/costs of the above?