The Globe and Mail reports in its Tuesday, July 28, edition that bond investors are increasingly paying for protection against potential sharp increases in interest rates as they grapple with uncertainties about Federal Reserve tightening. A Reuters dispatch to The Globe reports that markets are questioning whether new Fed chair Kevin Warsh will prioritize inflation control, which may necessitate rate hikes, or yield to President Trump's calls for cuts. There is a growing demand for a specific type of swaption, or an option on interest-rate swaps, that would profit if long-term borrowing costs rise. Some are hedging against the 10-year swap rate reaching 6 per cent, more than 200 basis points higher than today's 4.23-per-cent level. Interest-rate swaps, commonly used to hedge rate risk related to U.S. Treasuries, enable investors to swap fixed-rate payments for floating ones and vice versa. Analysts say the market has moved away from strategies in which investors collect premium by selling volatility and toward buying protection against large interest-rate moves. The shift reflects worries about continued Fed tightening and rising long-term yields due to persistent inflation and significant government borrowing needs.