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ETFs That Short Bonds


Recent upticks in interest rates don’t bode well for bond exchange traded fund investors. As Treasury yields rise, income-seeking investors still have a few investment choices in not-so-obvious areas of the market.

“While the aggressive jump in bond yields over the past few weeks has spooked global markets, Paulsen, chief investment strategist at Wells Capital Management, said the underlying characteristics behind the recent uptick should help soothe jittery investors. The main crux of his argument is rising consumer confidence has accompanied the boost in bond yields, which historically is a bullish development,” Steven Russolillo wrote for The WSJ.

Betting against bonds may be the best way to play rising interest rates, reports James Brumley for InvestorPlace.

The ProShares Short High Yield ETF (SJB) has earned more than $6.2 million in new assets, while SPDR Barclays Capital High Yield Bond (JNK) has seen outflows of $1.2 billion as investors are shift into bond ETFs with a shorter duration. Another way to short the bond market is through the ProShares Short 20+Year Treasury ETF (TBF) . TBF is the most liquid of the bond funds and has the largest asset pool, reports Brumley. [Bearish Short ETFs for a Pullback in Stocks]

Of course, it should be noted that leveraged and inverse ETFs are designed for traders rather than buy-and-hold investors.

“SJB told a different story in the month of May when it raked in almost $6.2 million in new assets. That may not sound like much, but consider that the ETF had just $45.3 million in assets at the end of the first quarter and $6.2 million in one month is a tidy haul,” Benzinga wrote. [Two High-Yield Bond ETFs for Rising Rates]

“The price on the 10-year Treasury note increased 18/32 to 93 22/32. The yield fell to 2.47 percent, from 2.54 percent late Wednesday. The yield climbed to 2.66 percent on Monday, the highest since August 2011. The rate has surged since May 3, when it touched 1.63 percent, its low for the year. Concern that the Fed is poised to start pulling back on its stimulus prompted investors to sell bonds, pushing the yield higher,” Associated Press reported. [Short ETFs for Rising Interest Rates]

Investors are paring back on fixed income holdings since yields are likely to rise more in the second half of 2013. As the Federal Reserve is pulling back on monetary stimulus, the outlook for yields is to just keep going higher.[Are Treasury ETFs Riskier Than Stocks?]

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.