Alternatively, fixed-income investors can also hedge their corporate debt exposure with inverse high-yield and investment-grade corporate debt ETFs. For instance, the ProShares Short High Yield ETF (NYSEArca: SJB) takes the inverse -1x or -100% daily performance of the Markit iBoxx $ Liquid High Yield Index, and the ProShares Short Investment Grade Corporate ETF (NYSEArca: IGS) tracks the -1x or -100% daily performance of the Markit iBoxx $ Liquid Investment Grade Index. [Inverse ETFs to Hedge Against Hurdles Ahead]
The two inverse corporate bond ETF plays may be less volatile than the inverse long-term Treasury ETF options as SJB only has a duration of 3.63 years and IGS shows a 8.05 year duration. In contrast, TBF has a 18.68 year duration, TBT has a 18.68 year duration and TMV has a 17.64 year duration. Duration is a measure of a bond fund’s sensitivity to changes in interest rates, so a longer duration corresponds with greater sensitivity and risks.
“Today, the Bigger Short is in a much larger marketplace,” Singer wrote, comparing bonds to subprime mortgages, “so it can be undertaken in whatever size one can stomach, and the cost of effectuating it during the waiting period is really low.”
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.