How to short Treasuries

Discussion in 'ETFs' started by nravo, Apr 22, 2009.

  1. nravo


    I am looking for an instrument, besides bond and futures that, unlike say TBT, will not have the decay from daily compounding. It doesn't need to have leverage either. What's out there?
  2. "Barclays offers 3 treasury ETFs. They are: iSHARES Lehman 20+ Year Tsy Bond Fund (TLT),
    iSHARES Lehman 7-10 Year Tsy Bond Fund (IEF), and iSHARES Lehman 1-3 Year Tsy Bond Fund (SHY). As you can probably tell by the names, the key difference among them is the maturity date. The maturity date affects the income as well as the day-to-day volatility with shorter term bonds being less volatile than the longer term bonds."

    "ProShares Ultra-Short 20+ Treasury Fund (TBT). "

    Google it there are plenty.
    The way I see it, coumponding (interest) is embeded in the price. No way to get out of it.
    Thanks for asking, I always forget that there are things like that out there somewhere.
  3. nravo


    I want a long-term hold position, preferably in an IRA, so a short position is not possible. The TBT and other ETFs, if inherently short of leveraged, often have negative daily compounding, which would eat me alive long-term. Can't believe there is no way to do this effectively.

    Maybe I'll have to do long FX ETFs and Gold instead. Shame.
  4. Open a "futures" IRA, you only have to roll 4X a year, it's really not that big of a deal, you can even trade spreads once in a while to capture a little extra income.

  5. nravo


    I have futures in my IRA and try not to use it. Contract size is what? $115K. That's more than I was to have riding on this position. Yeah, I know it's only like 4K down. But I don't want the leverage.
  6. nravo


    I also did think about buying a ZN put, but there's not much action long-term, and short-term too much time decay.
  7. You need to look into purchasing the TNX Exchange Traded Fund.

    As it is an ETF of the ten-year bond yield, it moves opposite the ten year bond futures (ZN or TY depending on your broker).

    Good Luck
  8. Are you sure you are not looking at the actual YIELD?

    I do not see any such ETF listed.
  9. Yes, it is the Ten Year Treasury Yield.
    TNX Yield

    ... and of course as Bond yields go up, Bond prices go down
    Bond Yield to Price Ratio

    After Googling all over the internet, I found that the only short oriented, inverse bond funds are PST [7-10 year] and TBT [20 year] (which the OP has mentioned).

    Fixed Income ETFs

    There is only limited demand for the product, so there is not a great liklihood that too many other inverse oriented bond fund ETFs will be coming to market any time soon. If the OP just position sizes appropriately in either ETF he shouldn't have much of a problem.

  10. nravo


    Are these marked in price daily, or do they follow an index? If simply re-calibrated daily, how do you avoid daily negative compounding?
    #10     Apr 23, 2009