ProShares Expands Its Treasuries Offerings

ProShares, a pioneer in the leveraged ETF industry, is planning to expand its product platform with the introduction of two new Treasuries-linked leveraged ETFs. The proposed funds are:

• ProShares Ultra 7-10 Year Treasury
• ProShares Ultra 20+ Year Treasury

Both funds will seek to capture 200% of the daily return of their underlying indexes, and charge an expense ratio of 0.95%. For a more thorough discussion of how these funds will achieve their goals, see our Guide to Leveraged ETFs.

These funds will be symmetrical to two existing offerings from ProShares. The ProShares UltraShort 20+ Year Treasury (TBT) offers 200% leveraged inverse exposure to long-term government bonds, while the ProShares Ultra 7-10 Year Treasury (PST) offers leveraged inverse exposure to intermediate-term Treasuries.

The new funds from ProShares will compete with several Direxion ETFs: the Daily 10-Year Treasury Bull 3x Shares (TYD) and its Bear counterpart (TYO), as well as the Daily 30-Year Treasury Bull 3x Shares (TMF) and its corresponding Bear fund (TMV).

Treasuries were one of the few investments that avoided steep losses during the global recession, but have seen significant declines this year as investors have eased out of safe havens and regained some appetite for risk. The iShares Barclays 20 Year Treasury Bond Fund (TLT) has dropped more than 20% in 2009, while the Barclays 7-10 Year Treasury Index Fund (IEF) has slipped 7%.

Interest Rate Activity?

Interest rates around the world have remained near record low levels for over a year, as central banks try to pull their economies out of a deep recession. And the U.S. has certainly been no exception. Earlier this week, the Treasury Department auctioned off $30 billion of six-month bills at a discount rate of 0.15%, a level not seen in a half century.

Fed officials have kept the federal funds rate (the rate that banks charge each other) at an all-time low of 0% to 0.25% since December. While most believe that the recession has now ended, the Fed isn’t expected to begin raising rates until late in 2010, and perhaps not until 2011, to avoid disrupting a fragile recovery process.

Disclosure: No positions at time of writing.

Comments

[Mad Hedge F...:]

cjo For the last six months there has been a great big whopping contradiction in the markets. The stock market has been discounting a return to the “Roaring Twenties,” while the bond market has been anticipating another “Great Depression.” After yesterday’s publication of the Labor Department’s September nonfarm payroll number showing the loss of another 263,000 jobs, it looks like the bond market now has the upper hand. This takes the unemployment rate up 0.1% to 9.8%, and total job losses for this recession to 7 million. The really disturbing aspect of this number is that 57,000 teachers were fired, as states chop budgets to the bone. This is really eating our seed corn by the bushel full. Of course, I have been banging pots and pans, setting off distress flares, and yanking the fire alarm, trying to alert readers that this kind of disappointment was coming (click here for “Risk Reversals Can Be Such a Bitch” and here for “Stocks Offer No Value”). Shares have dropped 5% from last week’s peak, as the bond market soared, the ten year yield reaching nosebleed territory of 3.05%. The dollar maintained its flight to safety status, which to me is one of the great ironies of all time. It’s like that reprobate, alcoholic uncle with the bad teeth, who, when your car breaks down in the middle of a downpour in a bad neighborhood, will always let you crash on his sofa. Let’s call him your Uncle Sam. You have to hand it to PIMCO’s inveterate card counter, Bill Gross, who says this is all about transitioning to a “new” normal of 1%-2% real GDP growth. That’s why he was loading the boat with bond yields at 4%, a “ballsey” move at the time, which now smells like roses. I guess that’s why they call him the “Bond King.”

Oct 19 11:40 AM