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Interest Rate ETF: Beat Bernanke At His Own Game


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 Rising Or Falling Rates, These Interest Rate ETFs Have Your Back

Interest Rate ETFIn the world of ETFs, there are literally hundreds of ETFs that are considered “bond ETFs,” but not a single one carries the label “interest rate ETF.” The fact that the label “interest rate ETF” does not yet exist may make some investors infer that there aren’t any ETFs specifically designed for playing rising or falling interest rates. Nothing could be further from the truth.

In the search for the best interest rate ETF, investors have a dizzying array of options. In fact, there are two ETFs that are very much interest rate ETFs, they just don’t carry that specific designation. For investors looking for the relative safety of U.S. Treasuries while stashing some cash, the iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) should be your interest rate ETF of choice. Obviously, investing in longer-dated Treasuries exposes the investor to a potentially adverse impact if interest rates rise and this is extremely conservative investment posture typically reserved for older investors.

If you’re looking to bet on interest rates rising, there is a bearish equivalent to TLT. Enter the ProShares UltraShort 20+ Treasury (NYSE: TBT). TBT is one of the better options for an interest rate ETF that best on rates rising. That statement is true, but in an environment where it is almost impossible for the Federal Reserve to raise rates, TBT is suffering.

Other Interest Rate ETF Options

There are a couple of other plays on betting against rising rates. The Pro Shares Short 20+ Year Treasury (NYSE: TBF) is TBT’s unleveraged cousin. If you need a lot of juice in your interest rate ETF, try the triple leveraged Direxion Daily 20+ Year Treasury Bear 3X Shares (NYSE: TMV). Bonds can be boring and bond ETFs can be boring, but make TMV your interest ETF of choice and you will never be short on excitement.

Not Your Typical Interest Rate ETF…

The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE: LQD) merits attention as a worthy interest rate ETF idea. Due to LQD’s low duration, the ETF isn’t as vulnerable to interest rate increases and income investors can love LQD as an interest rate ETF because it yields nearly 5%.

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