“The fact that rates are going up this year is not in people’s view . . . That could mean a big upward move in yields that will lose a lot of people money,” Marcus Brookes, head of the multi-manager team at Schroders, said in a Financial Times article.
For instance, short-term Treasury bonds have slightly pulled back on rising rate expectations. However, with their bearish short-term Treasury bets, the zero and negative duration ETFs could capitalize on further declines and generate some price appreciation. [Short-Term Treasury ETFs Trip As Yield Curve Flattens]
“There is a feeling in the bond markets that there is this permanent put,” Bill Eigen, head of absolute return fixed income at JPMorgan Asset Management, said in the FT article. “But the US Federal Reserve may hike rates by 50 basis points in the first half of 2015. If that happens, the two-year US Treasury will react violently. It could be like 1994 again.”
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.