What goes down must eventually come back up, right? The rock-bottom interest rates we’ve been enjoying for the last few years aren’t going to last forever. They won’t be as necessary to help goad an economic recovery, so as the picture brightens both here and around the world, they’ll naturally have to go back up. [9 ETFs for Bullish and Bearish Dollar Sentiment.]

The catch for you, dear investors, is that bond prices share an inverse relationship with interest rates. As rates rise, the price of bonds fall. If you’re holding bonds with the intent to sell them sooner rather than later, this will impact you in the form of lost principal. This is why many investors take a “laddered” approach to bond investing and buy bonds of varying maturities, in order to mitigate interest rate risk. [It's Time to Approach Bond ETFs Differently.]

For more stories about the U.S. dollar, visit our currency ETF category.

• PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP)

• iShares Barclays 1-3 Year Treasury Bond (NYSEArca: SHY): Short-term bonds tend to come in favor as interest rates rise and hit long-term bond prices

• United States Oil (NYSEArca: USO): When interest rates rise, the dollar tends to weaken, which puts various commodities priced in dollars – such as oil – back in favor

• ProShares UltraShort 20+ Treasury (NYSEArca: TBT) and Direxion Daily 30-Year Treasury Bear 3x (NYSEArca: TMV): Long-term Treasuries will be hit the hardest when interest rates are hiked. For the risk-hungry among you, consider shorting long-term Treasuries. Before doing so, though, understand how these funds work! [All About Leveraged and Inverse ETFs.]

For full disclosure, Tom Lydon’s clients own shares of SHY.

Rising interest rates and the threat of inflation has bond investors, for the most part, fleeing the scene.  John Spence for MarketWatch says the following types of funds are letting investors bet against the longer-dated Treasury shares, which could get hit as the Federal Reserve hikes rates in the future:

• ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT)

• Direxion Daily 30-Year Treasury Bear 3x (NYSEArca: TMV)

• ProShares UltraShort 7-10 Year Treasury (NYSEArca: PST)

Last week, the Federal Reserve upped the emergency loan rates they charge banks. While these rate hikes don’t affect consumers or corporations, the move did put investors on alert for an eventual reality: someday, record low rates are going to go back up. When they do, billions that have been stashed in Treasuries during the financial crisis could be lost. Enter short Treasury ETFs. [Leveraged ETFs Are Popping Up in Many Varieties.]

Rate hikes could be far off, though. Federal Reserve Chairman Ben Bernanke reiterated yesterday that the central bank wouldn’t raise them until the economy was on firmer ground.

Leveraged and inverse ETFs are not for everyone. They’re meant to reflect the daily moves of the market; to hold them longer is to risk them veering further away from their benchmarks. This effect is heightened in volatile markets. [Everything You Need to Know About Leveraged and Inverse ETFs.]

For more stories about leveraged ETFs, visit our long-short ETF category.

ProShares

The new ETFs are the ProShares Ultra 20+ Year Treasury (NYSEArca: UBT) and the ProShares Ultra 7-10 Year Treasury (NYSEArca: UST). [How leveraged and inverse ETFs work.]

The two funds join three other ETFs from the provider that focus on the bond market. One of those funds is the ProShares Ultra Short 20+Year Treasury ETF (NYSEArca: TBT), which has been particularly successful, attracting $4.6 billion in less than two years, according to Ron on Benzinga.

Be aware that leveraged and inverse ETFs work differently than traditional funds. They can be a useful tool for short-term traders who understand how they work, so be sure to understand them before you buy. [Another twist on the leveraged ETF in the works.]

For more stories about new ETFs, visit our new ETF category.

ProShares

ProShares has filed for two new long Treasury bond ETFs. The ETFs are:

• ProShares Ultra 7-10 Year Treasury
• ProShares Ultra 20+ Year Treasury

These new funds are in addition to ProShares’ existing Treasury bond funds, which are  ProShares UltraShort 7-10 Year Treasury (NYSEArca: PST), ProShares Short 20+ Year Treasury (NYSEArca: TBF) and ProShares UltraShort 20+Year treasury (NYSEArca: TBT)

Read the prospectus and be sure to fully understand how leveraged and inverse ETFs work before you buy. They’re very unique products and are not right for everyone. (Read all about how leveraged and inverse ETFs work).

For more stories about new ETFs, visit our new ETF category.

Leveraged ETFs have been designed for short-term traders who want to maximize the movements of certain market sectors, hedge positions and short the markets.  They are great tools that work exactly as they should for those who are educated and understand how they operate and what they’re for.

Leveraged ETFs are now getting a bad rap because some people who didn’t understand them used them and got burned in the process.

A recent regulatory filing indicated that 24% of ProShares UltraShort 20+Year Treasury (TBT), 11% of ProShares UltraShort S&P 500 (SDS) and about 9.7% of ProShares Ultra Financials (UYG) were owned by institutions, reports Daisy Maxey of The Wall Street Journal.

Does this mean that the remainder are owned by retail investors? According to ProShares LLC, these numbers are distorted because it doesn’t reflect institutional investors who don’t have to file a 13F with the Securities and Exchange Commission (SEC).

Regardless, retail investors make up a good chunk of those that utilize these investments and will have a significant impact on there future.

Meanwhile, the momentum against leveraged funds is gathering steam in Massachusetts, says On Wall Street. The state subpoenaed four brokers in order to get sales, revenue and training records. Those brokers are Ameriprise, UBS, LPL and Edward Jones, all of which in recent days have announced that they’re no longer selling those types of funds in response to FINRA’s warning. FINRA has since backed off its initial warning and noted that the funds can be appropriate for use by financial professionals.

Leveraged and inverse ETF providers all have addressed the issues and misperceptions about their funds that have cropped up in the last several months.

• Direxion noted that there is no one holding period that’s universally appropriate for leveraged and inverse funds. The products can be held for days, weeks or even a month or more, depending on the market, the investor’s view and goals.

• ProShares released their own study last month about the effects of compounding.

The bottom line is, before any investor chooses to buy these funds, they need to understand how they work. They’re not like other ETFs, but that doesn’t mean they’re bad. It’s also important to note that these funds are not for everyone, something even the providers have repeatedly stressed.

For more stories on leveraged and inverse ETFs, visit our long-short category.

Kevin Grewal contributed to this article.

Some investors seemed to think so last week. Leveraged ETFs that short U.S. Treasury bonds saw inflows after yields popped up, says John Spence for The Wall Street Journal.

The returns for U.S. Treasuries are starting to normalize and even start to increase, writes Chris Fernandez for Seeking Alpha. Warren Buffet recently stated that the bubble forming in the U.S. Treasuries may even rival that of the housing bubble before the collapse.

As the U.S. government increases spending, the government will have to borrow by issuing Treasuries with maturities ranging from 1 to 30 years. Treasuries are now declining about 20% from previous highs, and yields are over 4%. If buyers of Treasuries don’t want any more debt then the government will have to entice them with higher yields, or lowering Treasury prices.

The current yields have yet to reach historic lows and the government is probably not finished with getting as much money out of outside sources as it can. But yields will probably have to be increased if inflation sets in and repayments could be payed out in depreciated dollars.

There are also talks of the U.S.’s AAA credit rating being downgraded. If this were to happen then investors would demand higher yields for the riskier debt, which would push Treasury prices down.

When the U.S. government eventually raises interest rates, Treasury prices will fall and yields will rise. More recently, the U.S. has auctioned Treasuries and demand was low. Treasury prices may continue to fall as the government tries to sell more Treasuries that borrowers won’t be too enthusiastically investing in.

How can someone capitalize on decreasing Treasury prices? There are some short Treasury ETFs available but be sure that you understand the risks involved in investing in leveraged funds before you part take in them.

• Ultrashort Lehman 20+Year Treasury Proshares (TBT): up 51.4% year-to-date

• Direxion Daily 30 Year Treasury Bear 3X Shares (TMV): up 43.6% in the last month

Max Chen contributed to this article.