Shorting Bonds with ETFs

Recent upticks in interest rates don’t bode well for bond exchange traded fund investors. As Treasury yields rise, income-seeking investors still have a few investment choices in not-so-obvious areas of the market.

“While the aggressive jump in bond yields over the past few weeks has spooked global markets, Paulsen, chief investment strategist at Wells Capital Management, said the underlying characteristics behind the recent uptick should help soothe jittery investors. The main crux of his argument is rising consumer confidence has accompanied the boost in bond yields, which historically is a bullish development,” Steven Russolillo wrote for The WSJ.

Betting against bonds may be the best way to play rising interest rates, reports James Brumley for InvestorPlace.

The ProShares Short High Yield ETF (NYSEArca: SJB) has earned more than $6.2 million in new assets, while SPDR Barclays Capital High Yield Bond (NYSEArca: JNK) has seen outflows of $1.2 billion as investors are shift into bond ETFs with a shorter duration. Another way to short the bond market is through the ProShares Short 20+Year Treasury ETF (NYSEArca: TBF). TBF is the most liquid of the bond funds and has the largest asset pool, reports Brumley. [Bearish Short ETFs for a Pullback in Stocks]

Of course, it should be noted that leveraged and inverse ETFs are designed for traders rather than buy-and-hold investors.