ProShares Debuts Bull Bond Plays

April 14, 2011

ProShares, the Bethesda, Md.-based firm known for its leveraged and inverse exchange-traded funds, today launched a pair of double-exposure bond ETFs canvassing high-yield and investment-grade corporate debt, a first for U.S. ETF investors.

The ProShares Ultra High Yield ETF (NYSEArca: UJB) and the ProShares Ultra Investment Grade Corporate ETF (NYSEArca: IGU) allow investors to make concentrated bullish bets on bonds at a time when the market seems to be bracing for the end of the Federal Reserve’s easy money policies. Tighter credit would put downward pressure on bond prices, particularly on debt with longer maturities.

ProShares’ new funds come on the heels of the company’s March launch of the market’s first inverse plays on the same corporate bond indexes, which the company billed as useful tools for investors to deal with the possibility of what it called a bond bubble burst.

UJB is designed to provide investors with twice the daily performance of its Markit iBoxx benchmark, a modified market-value-weighted index that tracks dollar-denominated high-yield corporate bonds. It joins the ProShares Short High Yield ETF (NYSEArca: SJB), which provides single-inverse exposure to that same benchmark. SJB, like many inverse and leveraged funds, rebalances daily.

The Markit iBoxx index comprises bonds from issuers that have at least $1 billion in total outstanding debt; have particular bond issues with at least $400 million of outstanding face value; and have debt with three to 15 years to maturity, ProShares said.

Similarly, IGU joins the ProShares Short Investment Grade Corporate ETF (NYSEArca: IGS), an inverse play on IGU’s index, the Markit iBoxx $ Liquid Investment Grade Index. That benchmark comprises investment-grade bonds from issuers with at least $3 billion in outstanding debt; individual debt issues of at least $750 million of outstanding face value; and bonds with at least three years to maturity.

The new ETFs, like all ProShares funds, have annual expense ratios of 0.95 percent.

 

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