Afraid Of Interest Rate Hikes? Check Out This ETF, Which Gains On Rising Rates

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March 9, 2017 11:01am NYSE:RISE


With interest rates looking like they will be raised again next week, many bond investors are likely thinking about how to protect their portfolios.

One possible option is the SIT Rising Rate ETF (NYSE:RISE). RISE is a strategic interest rate-hedging tool that gives investors the opportunity to benefit from the rise in the interest rates of U.S. Treasury notes.

The fund works by targeting a negative 10-year duration using futures and options on 2, 5 and 10-year maturity Treasury futures contracts. RISE can be used strategically as a hedge, allowing investors to keep their bond positions, but providing protection when rates rise.

Or, investors can buy it simply to profit from higher rates, even if they don’t have significant bond exposure.

Rates were indeed on the rise on Thursday, with the 10-Year Treasury Note hitting 2.59%. As Bloomberg notes, 30-year mortgages in the U.S. have also jumped to their 2017 highs:

The average rate for a 30-year fixed mortgage was 4.21 percent, up from 4.1 percent last week, Freddie Mac said in a statement Thursday. The average 15-year rate climbed to 3.42 percent from 3.32 percent.

The Fed will meet next week to determine their latest interest rate policy, and the implied odds of a rate hike recently hit 100%, according to Fed funds futures contracts.

The SIT Rising Rate ETF (NYSE:RISE) was trading at $23.86 per share on Thursday morning, up $0.09 (+0.38%). Year-to-date, RISE has gained 0.38%, versus a 5.99% rise in the benchmark S&P 500 index during the same period.

RISE currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 14 ETFs in the Non-Traditional Bond ETFs category.

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