Yields on 10-year U.S. Treasuries are up 1.6 percent at this
writing Monday, taking the one-month yield surge on those bonds
north of 15 percent.
With those yields flirting with 2.88 percent, the conversation
about three percent yields becomes more important and possibly
more a matter of "when" not "if."
Rising Treasury yields are not just bad news for bond
investors. Scores of equity-based ETFs have been decked in the
past month by the yield spike. That also means there are inverse
and leveraged ETFs that are benefiting from rising rates. Of the
21 best-performing ETFs over the past month, roughly a third are
inverse or leveraged plays on U.S. government bonds or sectors
sensitive to rising interest rates.
Two Leveraged ETFs For Rapid Near-Term Gains
Assuming rising 10-year yields are not a temporary phenomenon,
active traders should consider getting acquainted with the
following leveraged funds.
Direxion Daily Real Estate Bear 3X ETF (NYSE:
) Not including Monday's performance, DRV
has surged 22 percent in the past week
. The primary catalyst is rising interest rates. Yields on U.S.
government 10-years are up 30 basis points in the past month.
Over that same time, eight of the 20-worst non-leveraged ETFs are
DRV's roughly $19 price tag looks affordable today, but the
fund will undergo a 1-for-4 reverse split that goes into effect
on Tuesday. The fund attempts to deliver three times the daily
inverse performance of the MSCI US Investable Market 2500 Index.
That index is primarily allocated to specialized and retail REITs
as those two REIT sub-sectors combine for over 56 percent of the
ProShares UltraPro Short 20+ Year Treasury (NYSE:
) The 10-year Treasury yield garners most of the headlines, but
it should not be forgotten that longer-dated bonds are more
sensitive to changes in interest rates. That explains TTTT's
recent success. Heading into the start of trading Monday, TTT had
gained 15.7 percent in the past month.
On Monday, the fund hit a new 52-week high. Since the start of
August, yields on 20-year U.S. government bonds are up 13 basis
points while the yields on 30-years have gained nine basis
points. TTT attempts to deliver three times the daily inverse
performance of the daily performance of the Barclays U.S. 20+
Year Treasury Bond Index.
ProShares UltraShort Utilities (NYSE:
) Folks can say the impact of rising rates is priced into
utilities stocks all they want. The reality is the SPDR Utilities
) is now down more than five percent in the past month, a
performance that serves as a reminder to conservative investors
that everything is find and dandy with utilities stocks...until
interest rates rise.
Among leveraged ETFs, SDP does not get a lot of press,
though some have been prescient enough
to call attention to the fund. In the past month, SDP is up
nearly 11 percent.
Investors should note SDP is not the double-leveraged inverse
equivalent of XLU, but rather the iShares U.S. Utilities ETF
For more on ETFs, click
Disclosure: Author owns none of the securities mentioned
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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