It’s Getting Steeper

If volatility isn’t a worry, and the odds of further steepening seem strong, exposure to the 10-year note can be leverage by doubling up, dollar-wise, on DTYS. That would have produced a 10 percent gain since August. Treble the wager on DTYS and gains go up to 12 percent.

Now, there are a couple of caveats about using the iPath notes. First, they’re unsecured debt obligations of Barclays Bank—they’re just promises to pay the index return at the notes’ maturity date. So, investors have to be comfortable shouldering the counter party risk. And, second, that maturity date is coming up fast—August 2020, in fact. These notes can’t be permanent portfolio positions. They’re tactical, rather than strategic allocations.

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DisclosureBrad Zigler pens Wealthmanagement.com's Alternative Insights newsletter. Formerly, he headed up marketing and research for the Pacific Exchange's (now NYSE Arca) ...

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