Inverse Treasury ETFs to Play as 10-Yr Yield at Highest Since November

Tevarak / iStock via Getty Images

The financial markets were taken aback when the rating agency Fitch downgraded the United States to AA+ from AAA this week, expecting fiscal deterioration over the next three years and repeated last minute debt ceiling negotiations that can pressurize the government’s ability to pay its bills. U.S. stocks slumped on Wednesday following the news.

Fitch initially raised concerns about a potential downgrade in May and continued to support that stance in June after the resolution of the debt ceiling crisis. The agency, however, stated its intention to conclude the review in the third quarter of the current year, per Reuters, quoted on Yahoo Finance.

If this was not enough, ADP reported much stronger private sector job gains in July than economists expected. Private sector jobs increased by 324,000 in July, following a revised 455,000 increase in June. The data breezed past economists’ expectations (surveyed by FactSet) of 185,000 job creations, as quoted on Barrons.

It means that the U.S. economy is on solid footing. This piece of information may lead the Fed to hike rates further to pull down stubborn inflation. The double whammy of a Fitch Rating cut and chances of a hawkish Fed has pushed the 10-Year U.S. Treasury yield to the highest level since November 2022, according to Dow Jones Market Data, quoted on Barrons.

The benchmark 10-year U.S. treasury yield closed Aug 2 on 4.08%, up 12 bps from Jul 28, 2023. In the key trading session on Aug 2, the very yield touched even 4.09%. Traders are eagerly anticipating Friday’s U.S. employment report to gain a clearer insight into the current state of the job market. If that also comes out great, yields to likely to surge higher.

Against this backdrop, below we highlight a few inverse treasury ETFs that have gained on Aug 2.

ETFs to Play

Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV) – Up 3.1% on Aug 2; Up 8.7%

AUM: $298.35 million

Expense Ratio: 1.86%

ProShares UltraPro Short 20+ Year Treasury (TTT) – Up 3.3% on Aug 2; Up 8.4%

AUM: $218.80 million

Expense Ratio: 1.08%

ProShares UltraShort 20+ Year Treasury (TBT) – Up 2.1% on Aug 2; Up 5.7%

AUM: $470.15 million

Expense Ratio: 2.45%

ProShares Short 20+ Year Treasury (TBF) – Up 1.1% on Aug 2; Up 2.9%

AUM: $167.16 million

Expense Ratio: 2.48%

Word of Caution

As a caveat, investors should note that inverse-leveragedproducts are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures. Still, for ETF investors bearish on U.S. treasuries for the near term, either of the above products can be an interesting choice.

ProShares UltraShort 20+ Year Treasury (TBT): ETF Research Reports

Direxion Daily 20+ Year Treasury Bear 3X Shares (TMV): ETF Research Reports

ProShares UltraPro Short 20+ Year Treasury (TTT): ETF Research Reports

Proshares Short 20+ Year Treasury (TBF): ETF Research Reports

To read this article on click here.

Zacks Investment Research

This article originally appeared on Zacks

ALERT: Take This Retirement Quiz Now  (Sponsored)

Take the quiz below to get matched with a financial advisor today.

Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.

Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future

Take the retirement quiz right here.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.