Bond investors are growing increasingly bearish on Trasuries futures. Exchange traded fund traders can also hedge against a fall in the Treasuries market through inverse products.
For instance, the ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT) seeks to deliver twice the daily inverse performance of the Barclays Capital US Treasury 20+ Year Treasury Bond Index. TBT has increased 3.4% over the past week but is still down 39.5 year-to-date. [10 Best Leveraged ETFs of 2014]
TBT’s triple-leveraged cousin, the Direxion Daily 20-Year Treasury Bear 3X ETF (NYSEArca: TMV), has increased 4.7% over the past week but declined 54.3% year-to-date.
Bond investors are building on what some are calling the largest short position ever in Treasury futures, reports Patti Domm for CNBC. Specifically, George Goncalves, head of rate strategy at Nomura, estimates that there are some $29 billion in shorts across the Treasury futures complex, the highest post-financial crisis level.
Adrian Miller, director of fixed income strategy at GMP Securities, also pointed out that there were 258,000 net short positions for 10-year futures on December 16, the second largest ever behind May 2010. In comparison, there were only 75,000 net shorts as of November 25. [Short-term, Money Market Bond ETFs Reveal Rising Rate Expectations]
“We started rolling into better data, and then we had the employment report. That probably quickened the trade,” Miller said in the article. “We can debate all day long how much rates are going to rise. …At the end of the day, it’s still going to be a rising rate environment.”