Exchange traded funds that invest in Treasury bonds have been strong over the past month as yields decline, but many investors remain worried about the U.S. debt ceiling and higher interest rates.
Eric Jacobson, Morningstar’s director of fixed-income research, mentions the key themes to examine in the bond market as the threat of rising interest rates looms. [Risk And Your ETF Portfolio: How to Protect It.]
ETFs designed to profit when Treasury bonds decline in value include:
- ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT): Gives interest income earned on cash and financial instruments that correspond to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Index.
- Direxion Daily 30 Year Treasury Bear 3x Shares (NYSEArca: TMV): Provides 300% of the inverse of the price performance of the NYSE 20 Year Plus Treasury Bond Index.
These ETFs provide inverse leverage on a daily basis. Yet betting against Treasuries with these inverse ETFs has been a losing strategy in 2011 as bond prices have risen and yields pulled back. [Treasury ETFs Rise Despite Investor Doubts.]
Jacobson noted the difficulties of trying to time the market.