The Direxion Daily 20-Year Treasury Bear 3X (NYSEArca: TMV), rival to TTT, added more than 11% last week and has surged 15.3% over the past month. Year-to-date, investors have added $62 million in new assets to TMV.
Looking ahead, the Federal Reserve interest rate hike has been a major point of concern for market players. In anticipation of higher rates ahead, investors can utilize inverse ETFs to hedge their fixed-income portfolio’s duration risk – the measure of a bond fund’s sensitivity to changes in interest rates, so a fund with a longer duration has a greater risk of price depreciation in response to rising rates. [Inverse ETFs for Market Turns]
Long-term bonds are most at risk of a rate hike. For instance, TLT shows a 17.7 year duration – duration is a bond fund’s measure of interest rate sensitivity. Consequently, a 1% rise in rates could translate to about a 17.7% decline in TLT’s price. In contrast, bond funds with shorter durations would have a lower sensitivity to rate changes.
ProShares UltraShort 20+ Year Treasury
Tom Lydon’s clients own shares of TLT.