“If you’ve been waiting for an entry point to UltraShort 20+ Year Treasury ProShares (TBT), it has arrived. Prices of long-term Treasury bonds, which move opposite to this exchange-traded fund, are falling as interest rates rise. This story can continue for months,” Timothy Middleton Reports From True Slant.

“Yesterday the spread between yields on long- and short-term bonds set a record. In market parlance, that means the yield curve is strongly positive. That’s an indicator of economic vitality. But a steep yield curve means high yields on long-term bonds, and prices move opposite to yields. All long-term bonds are disadvantaged in this regime, but Treasurys are most vulnerable because their only risk is rising interest rates,” Middleton Reports.

“(TBT) was trading this morning at $49.72. That’s up 7.1% in the last month, and 30.1% this year. The ETF is designed to move twice as much as the index it mirrors, which is the current market behavior of long-term Treasury bonds. As of this morning, two-year Treasury notes were yielding 0.88%. The yield for 30-year Treasury bonds was 4.62%. The difference between these rates–3.74 percentage points, or 374 basis points–is the spread. At the depths of the late recession it was relatively narrow, and several times actually turned negative,  meaning long rates were lower than short rates,” Middleton Reports.

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The investment (TBT) seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Barclays Capital 20+ Year U.S. Treasury index. The fund normally invests at least 80% of assets to investments that, in combination, have economic characteristics that are inverse to those of the index. It also typically invests in taking positions in financial instruments, including derivatives that should have similar daily return characteristics as twice the inverse of the index. The fund is nondiversified.

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ETF BASIC NEWS, TBT