Bond Index ETFs For Rising Interest Rates

September 20, 2012


Bond prices are falling and yields are rising in the wake of central bank stimulus, but bond ETF investors can protect themselves from much of the havoc rising rates can have on fixed-income prices by selecting products with shorter maturities, according to an article on ETF Trends.

The article listed a number of bond funds with durations  shorter than two years. Duration is a measure of a fixed-income instrument’s sensitivity to changes in yields, with shorter duration signaling less significant price changes to a given shift in yields. The funds mentioned were:

  • iShares Barclays 1-3 Year Treasury Bond Fund (NYSEArca: SHY)
  • Pimco 1-3 Year U.S. Treasury Index Fund (NYSEArca: TUZ)
  • Schwab Short-Term U.S. Treasury ETF (NYSEArca: SCHO)
  • Vanguard Short-Term Government Bond ETF (NYSEArca: VGSH)


The article said investors seeking a more direct hedge against falling Treasury prices should consider inverse Treasury ETFs, such as:

  • ProShares Short 20+ Year Treasury (NYSEArca: TBF)
  • ProShares Short 7-10 Treasury (NYSEArca: TBX)
  • ProShares UltraShort Barclays 20+ Year Treasury (NYSEArca: TBT)
  • ProShares UltraShort Barclays 7-10 Year Treasury (NYSEArca: PST)
  • Direxion Daily 20+ Year Treasure Bear 3x (NYSEArca: TMV)
  • Direxion 7-10 Year Treasury Bear 3x (NYSEArca: TYO)


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