ProShares UltraPro Short 20+ Year Treasury ETF
If you’re bearish on Treasuries, actively monitor your investments, and have the stomach for risk and volatility, investing in the ProShares UltraPro Short 20+ Year Treasury ETF (TTT) is another way to go.
TTT is a triple-leveraged, inverse debt ETF that aims to deliver three times the opposite performance of the Barclays U.S. 20+ Year Treasury Bond Index. TTT is comparatively small with net assets of about $42 million; it also has a higher-than-average expense ratio of 0.95%.
Pros: TTT has gained 46% since May 2 — a meteoric rise that was helped immensely by Bernanke’s comments about tapering off its bond buying. The relatively new ETF, launched in June 2012, is a sophisticated fund that uses swaps and derivatives to meet its daily objectives. Although TTT is thinly traded compared to its double-leveraged sibling, ProShares UltraShort 20+ Year Treasury (TBT), the 3x ETF will maximize returns if the bears devour the long bond.
Cons: Like all inverse, leveraged funds, TTT is not intended to be a buy-and-hold investment — if you take that approach, you’re likely to lose your shirt and pants. TTT is rebalanced every day and works best as a hedging tool to take advantage of a short-term, bearish move on Treasuries. Check out FINRA’s disclosure on these ETFs here.
Verdict: If the Fed reduces Treasury bond purchases and interest rates rise, investors stand to see additional gains from TTT and other Treasury bear ETFs. But make sure you go in with your eyes wide open — and be prepared to actively manage your holdings.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.