Short Treasury ETF Strategy Using Short Treasury ETFs

United States treasury bonds have been in bull market since the early 1980s, confounding many bond trading experts that have long expected treasury bonds to reverse course and decline in value.  With United States treasury bonds at multi-decade highs in price, it may be time to consider buying a short treasury Exchange Traded Fund (ETF), short treasury ETF, to profit from the eventual rise in United States interest rates that will cause United States treasury bonds to decrease in value and the holdings of a short treasury ETF to increase in value.

The short treasury ETF trade is actually a bet that the United States economy, and more broadly the world economy, will improve, leading central banks to raise interest rates and market forces to force interest rates even higher, as demand for United States treasury bonds lessens and they lose value.  A short treasury ETF is designed to rise in value as United States treasury bonds decrease in value.  The problem with the short treasury ETF trade in recent years is that the United States economy has been stuck in a slow growth environment and investors in the United States and throughout the world have been concerned about the ever-worsening sovereign debt crisis in Europe, which has caused demand for United States treasury bonds to be exceptionally great, which has caused treasury bonds to increase greatly in price and interest rates to fall to record low levels.

The following are short treasury ETF ideas that include short treasury ETFs that are designed to produce a one to one inverse return.  It should also be noted that these short treasury ETFs target different parts of the treasury bond yield curve (i.e., short, medium, and long), and therefore their performance will be dependent on price moves within the segment of the treasury bond yield curve that they target.

• ProShares Short 7-10 Year Treasury (TBX) – A short treasury ETF with a one times daily performance return objective that shorts medium term seven to ten year United States treasury bonds.
• ProShares Short 20+ Year Treasury (TBF) – A short treasury ETF with a one times daily performance return objective that shorts long term twenty year plus United States treasury bonds.

Short Treasury ETF Strategy Using Leveraged Short Treasury ETFs

The following are leveraged short treasury ETF ideas that include short treasury ETFs that are designed to produce two to one or three to one inverse returns on the part of the treasury bond yield curve that they target.  Please note that while leveraged short treasury ETFs often achieve their objectives on a daily basis of a two or three to one inverse return on treasury bonds, longer run returns may not be consistent with their objectives.

• ProShares UltraShort 3-7 Year Treasury (TBZ) – A leveraged short treasury ETF with a two times daily performance return objective that shorts short term three to seven year United States treasury bonds.
• ProShares UltraShort 7-10 Year Treasury (PST) – A leveraged short treasury ETF with a two times daily performance return objective that shorts medium term seven to ten year United States treasury bonds.
• ProShares UltraShort 20+ Year Treasury (TBT) – A leveraged short treasury ETF with a two times daily performance return objective that shorts long term twenty year plus United States treasury bonds.
• Direxion Daily 7-10 Yr Trsy Bear 3X Shrs (TYO) – A leveraged short treasury ETF with a three times daily performance return objective that shorts medium term seven to ten year United States treasury bonds.

Direxion Daily 20+ Yr Trsy Bear 3X Shrs (TMV) – A leveraged short treasury ETF with a three times daily performance return objective that shorts long term twenty year plus United States treasury bonds.

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