Inverse Treasury Bond ETF Funds
Treasury Bonds are one of the safest investments available, since they are backed by the United States government. The U.S. government promises to make all principal plus interest within the specified time period. It is very unlikely that the government will default on their Bond issuances or miss a scheduled payment, which is one of the main reasons why investors purchase bonds during economic uncertainty.
Even though the U.S. government guarantees bonds, investors can still loss money in the Treasury bond market. When interest rates increase and a bond holder wants to sell their bonds before maturity in the secondary market then they must ask for a lower price to cover the interest rate variance. In order to compensate the new bond holder, the seller must offer a bond at the same rate in which new bonds are issued.
Investors wanting to short the Treasury market can purchase Inverse Treasury Bond ETFs. Bond prices will usually decline when bond rates increase or there is less market risk. When bond prices go down and the bond yield increases then the Inverse Treasury Bond ETF will profit.
Investors wanting to short the market also have the opportunity to purchase leveraged Treasury Bond ETFs. They can purchase an ETF that is 200% (2x) of the inverse. Purchasing a leveraged ETF gives more opportunity to make a much higher rate of return without having to invest large amounts of money into the market.
Investors can choose from the 7-10 year Treasury ETF or the 20+ year Treasury ETF if they want to participate in shorting the Treasury market. The 7-10 year Treasury ETF invests in Treasury Swaps and Treasury Notes. The 20+ year Treasury invests in 20+ year treasury swaps and US 20 & 30 year bonds.
Available Treasury Bond Inverse ETFs
Proshares Short 20+ Year Treasury ETF (TFB)
Ultrashort 20+ Year Treasury ETF (2x the inverse) (TBT)
Ultrashort 7-10 Year Treasury ETF (2x the inverse) (PST)