Negative duration ETFs try to profit off a rising rate environment by heavily using short contracts to capitalize on falling bond prices if rates do rise. However, due to the more aggressive nature of this strategy, these types of ETFs will underperform if rates fall.
With a negative 10-year duration, investors may find that a 1% rise in U.S. Treasury yields results in about a 10% rise in RISE’s price. So the price moves nearly 10 times the change in yield. Duration is a measure of a bond funds sensitivity to changes in interest rates.
RISE is focused on the 2- and 5-year U.S. Treasury futures, which make up about 30% to 70% of the fund’s portfolio, with a minor 5% to 25% weighting in 10-year Treasury instruments.
For more information on the fixed-income space, visit our bond ETFs category.
Sit Rising Rate ETF