ProShares Files For Short Bond ETFs

by on March 17, 2011 | ETFs Mentioned:

ProShares, the largest issuer of inverse and leveraged ETFs, has plans to give investors more options for betting against fixed income securities. In a recent SEC filing, the Maryland-based company detailed three bond ETFs, including two offering -100% daily exposure to fixed income benchmarks and another offering -200% daily exposure. The proposed ETFs include:

  • Short High Yield (SJB): This fund would seek to deliver daily returns equal to -100% of the daily change in the iBoxx $ Liquid High Yield Index, the benchmark underlying the ultra-popular HYG. That benchmark is a modified market-value weighted index designed to provide a balanced representation of U.S. dollar-denominated high yield corporate bonds. HYG recently had an effective duration of just over four years and a 30-day SEC yield in the neighborhood of 6.2%.
  • Short Investment Grade Corporate (IGS): This fund would seek to deliver daily returns equal to -100% of the daily change in the iBoxx $ Liquid Investment Grade Index, the benchmark underlying LQD. That iShares ETF–the most popular in the Corporate Bonds ETFdb Category with more than $13 billion in assets–has an effective duration of about seven years and a 30-day SEC yield of about 4.3%.
  • UltraShort 3-7 Year Treasury Fund (Ticker TBD): This fund would seek to deliver daily results equal to -200% of the daily change in the Barclays Capital 3-7 Year Treasury Index. That benchmark serves as the underlying for the iShares Barclays 3-7 Year Treasury Bond Fund (IEI). ProShares already offers -200% leveraged ETF options for 7-10 year Treasuries (PST) and 20+ year Treasuries (TBT), so this proposed fund would help to fill out the company’s fixed income lineup.

Yields on junk bonds have plummeted over the last several months, as evidenced by the relatively meager current return being delivered by HYG and other high yield funds. If credit spreads tighten further, this corner of the fixed income market could come under pressure–potentially making a fund such as SJB an interesting option [also see our list of Leveraged Bond ETFs].

All of the proposed ETFs would charge an expense ratio of 0.95%, consistent with other leveraged ETFs from ProShares.

[For updates on all new ETFs, sign up for our free ETF newsletter]

Disclosure: No positions at time of writing.