“The biggest risk to the bond market and our tactical bullish trades is the combination of runaway tapering fears and the changing of the guard at the Fed to a more hawkish chairperson,” George Goncalves, head of interest-rate strategy at Nomura Securities, said in the article. [An ETN to Capitalize on a Steepening Yield Curve]
STPP tries to reflect the performance of the Barclays US Treasury 2Y/10Y Yield Curve Index, which captures the returns that are available from a “steepening” U.S. Treasury yield curve. The ETN has a 0.75% expense ratio.
The curve steepener trade utilizes derivatives, or futures, to capitalize on a widening yield difference that occurs due to an increasing yield curve between two Treasury bonds with varying maturities. The fund takes a weighted “long” position in 2-year Treasury futures contracts and a weighted “short” position in 10-year Treasury futures.
iPath US Treasury Steepener ETN
For more information on Treasuries, visit our Treasury bonds category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own TLT.