Many traders in TBT have been burned on speculation the multi-decade bull run in U.S. government debt is finally drawing to a close. [Short ETFs: U.S. Treasury Bonds]
“Investors interested in this fund essentially think the unprecedented moves by the Federal Reserve to pump liquidity into the financial system will ultimately result in higher inflation and sinking dollar value. Investors should also hold the thesis that the flight to quality will ultimately reverse itself, causing Treasury rates to rise,” writes Morningstar analyst Timothy Strauts in a profile of TBT.
“Investors should hold this speculative bearish conviction with a high degree of certainty in order to take on the amplified risks and returns that this double-short position provides,” he said. “Remember, though, that because of the compounding arithmetic, investors are not guaranteed to get double the index’s inverse return for any holding period longer than one day.”
ProShares UltraShort 20+ Year Treasury
Full disclosure: Tom Lydon’s clients own TLT.