Direxion Launches 3 Inverse Bond ETFs

March 23, 2011

Direxion serves up three inverse bond funds aimed at managing any bond market pullback.

Direxion Shares, the Newton, Mass.-based firm known mostly for its triple-exposure leveraged and inverse funds, rolled out three single-exposure bond ETFs today, the latest sign that ETF sponsors are thinking ahead should the bond-market rally of the past two years change course.

The three ETFs, which come close to spanning the entire yield curve, are:

  • Daily Total Bond Market Bear 1x Shares (NYSEArca: SAGG)
  • Daily 7-10 Year Treasury Bear 1x Shares (NYSEArca: TYNS)
  • Daily 20 Year Plus Treasury Bear 1x Shares (NYSEArca: TYBS)

 

The Direxion launch comes a day after the rollout of the ProShares Short High Yield EF (NYSEArca: SJB), also a single-exposure ETF designed for investors to profit should the bond market begin to sell off. The entire universe of fixed-income investment has been on an extended upward trend since the market crash of 2008. The resulting fall in yields has led many analysts to speculate that a broader 30-year secular rally in bond prices has about run its course.

“With the rising concern from investors about hedging fixed-income positions in their portfolios, we think these funds are timely,” Direxion President Dan O’Neill said in a press release. “We’re focused on helping sophisticated investors capitalize on near-term directional movements while providing exposure to the various markets in which investors have high levels of interest.”

The three new ETFs all come with annual net expense ratios of 0.65 percent, cheaper than the 0.95 percent ProShares charges for its ETFs.

ProShares is already the sponsor behind the biggest inverse and leveraged ETF in the world by assets. The ProShares UltraShort 20+ Year Treasury ETF (NYSEArca: TBT), which offers investors double the daily inverse of an index of long-dated Treasurys, had $5.76 billion in assets as of March 22, according to data compiled by IndexUniverse.

TBT’s popularity has ebbed and flowed in the period since the market crash, which has been characterized by signs of renewed growth—and concomitant concerns that the bond market rally would come undone—punctuated by fits of renewed anxiety surrounding the global recovery.

The worries about the sustainability of the recovery have been focused largely on Europe’s sovereign debt crisis and, more recently, on rising prices for oil and other economically crucial commodities.

 

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