On the other hand, a U.S. default could shake confidence in U.S. debt, pushing away investors, notably foreigners. Consequently, the U.S. dollar will depreciate and long-term rates will surge.
As rates spike, investors can capitalize on the trend through ETFs with inverse Treasury bond exposure, such as the ProShares UltraShort 20+ Year Treasury ETF (NYSEArca: TBT) and the Daily 20+ Year Treasury Bear 3X Shares (NYSEArca: TMV). [iShares: What to do when a Rising Rate Environment is NEAR]
For more information on Treasuries, visit our Treasury bonds category.
Max Chen contributed to this article.