10-Year Yields At 7-Year High: Short Treasury With These ETFs

The U.S. Treasury market has been out of investors’ favor this year, piling up heavy losses. This is especially true as Treasury yields have been on the rise with two-year yields climbing to its highest level since August 2008 at 2.593% and 10-year yields jumping to 3.093% - a level not seen since July 2011.

Inside The Surge in Yields

Growing inflationary expectations are raising speculations of faster-than-expected rates hike from the Federal Reserve, pushing bond yields higher. Inflation, which has been mysteriously low for years, has accelerated in recent months, with expectations hovering near the highest level since 2014.

This is due to a rise in energy prices, increase in raw material costs and a historically low unemployment rate, which suggests that wages could finally pick up. Additionally, the latest April retail sales data, which showed a 0.3% increase in sales and an upward revision in February and March sales, indicates firmer inflation.  

Further, the spike came amid renewed worries over the United States and China trade clash that could push prices and inflation higher, thereby pushing the Treasuries down.

Against such a backdrop, investors are pulling their money out of the long-term bond market. The rout has resulted in an opportune moment for bond investors to capitalize on beaten-down bonds in the form of inverse or leveraged inverse ETFs. For them, we have highlighted seven ETFs that could be worth buying for huge gains in a short span.

How to Play?

Inverse ETFs provide opposite exposure that is a multiple (-1X, -2X or -3X) of the performance of the underlying index using various investment strategies, such as, swaps, futures contracts, and other derivative instruments. All these have witnessed outsized gains so far this year. In fact, most of them are trading at a new one-year high.

ProShares Short 20+ Year Treasury ETF (TBF - Free Report)

This product provides inverse exposure to the ICE U.S. Treasury 20+ Year Bond Index. The index holds 38 securities in its basket with an average maturity of 25.98 years and modified duration of 17.66 years. The fund has accumulated $641.4 million in its asset base and charges 94 bps in annual fees. Volume is solid at 607,000 shares a day on average. The ETF has gained 7.8% so far this year.

1 2 3
View single page >> |

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.