The Fed’s Yellen was speaking into last Friday night in regards to topics including the current interest rate environment as well as the Fed’s bond portfolio.
According to a 10/20/17 New York Times article titled “Yellen Says Reduction of Bond Portfolio Going Well” during a speech to the National Economists Club Yellen made statements such as “good progress,” in terms of liquidating portfolio bond holdings and she also stated “The bottom line is that we must recognize that our unconventional tools might have to be used again,” which observers agree is alluding to future QE tactics.
The underlying theory is that as the Fed unwinds their bond portfolio they expect interest rates to gradually rise in the marketplace. A fund that we have covered in this piece in the past was launched in February of 2015 with this scenario of higher rates in mind and it is known as RISE (Sit Rising Rate, Expense Ratio 1.50%, $26.7 million in AUM).
Trading volume in the fund is not heavy, only averaging about 13,000 shares per day on a three-month average trailing basis but it saw a significant uptick in volume at the very end of August. Fund literature labels RISE as the following: “A strategic interest rate hedging tool that gives investors the opportunity to benefit from the rise in the interest rate of U.S. Treasury notes.” Furthermore, it is stated that “The portfolio targets a negative 10-year duration using futures and options on 2, 5, and 10-year maturity Treasury futures contracts.”
The SIT Rising Rate ETF (RISE) was trading at $23.17 per share on Monday morning, up $0.08 (+0.35%). Year-to-date, RISE has declined -2.52%, versus a 16.01% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.