If I went long in an FRA, would I be lending the principal for the appropriate future period? The same goes for an interest rate future. Is to go long to lend at the future date?
The forward rate agreement is generally a contract you would enter into with an investment bank. It is an over the counter product that they would price for your specific needs. Clearly whether you are long or not would depend on the context but usually you would be looking from the perspective of the counterparty to the investment bank. Given the above, the product is an agreement to borrow capital at a fixed rate over a given period. An interest rate future is a normal futures contract where the underlying asset is a fixed rate bond. If you go long you are agreeing to buy the bond. If interest rates go up the futures price goes down. This is because you have effectively entered into a contract to buy the bond for x at T but it is now worth less as the future receipts from the bond are discounted at a higher rate. Given the above and given that purchasing a bond is lending money then you are correct - going long on an interest rate future is effectively to agree to lend.
