Treasury Bond ETFs & Interest Rates

“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.