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Barclays launched six new ETNs last Tuesday (8/10/10) that seek to track a bond’s “yield change” instead of the more traditional “price change” targeted by other bond funds. These ETNs allow investors to create more customized yield curve strategies than the prepackaged iPath yield curve solutions: iPath US Treasury Steepener ETN (NYSEARCA:STPP) and iPath US Treasury Flattener ETN (NYSEARCA:FLAT), which were part of the same announcement.

The six new ETNs are unsecured debt obligations of Barclays Bank and are based on bullish and bearish versions of three indexes: Barclays Capital 2Y US Treasury Futures Targeted Exposure Index, Barclays Capital 10Y US Treasury Futures Targeted Exposure Index, and Barclays Capital Long Bond Futures Targeted Exposure Index.

The ETNs carry an investor fee (expense ratio) of 0.75% plus a one-cent hit to the NAV on each “roll day” during the year. Why this “roll fee” isn’t included in the investor fee is not clear.

The underlying indexes seek to achieve a 1 point increase for each 1 basis point decrease in the yield of the underlying Treasury securities. The inversion created by the indexes makes them move in the same direction as a price index would. The ETNs then apply a multiplier, +$0.10 for the bullish versions and -$0.10 for the bearish versions, to determine their price changes. With initial values of $50, this implies a 10 basis point (0.1%) change in yield will result in about a 2% change in each ETN’s value. Although the multipliers are less than one, they are applied against “basis points” so these are best viewed as leveraged products.

iPath US Treasury 2-year Bull ETN (NYSEARCA:DTUL) seeks to profit from “bullish” moves by increasing about $0.10 in value for every 1 basis point decrease in the yield of 2-year Treasury notes. Refer to the DTUL overview and DTUL info sheet (pdf) for additional information.

iPath US Treasury 2-year Bear ETN (NYSEARCA:DTUS) seeks to profit from “bearish” moves by increasing about $0.10 in value for every 1 basis point increase in the yield of 2-year Treasury notes. Refer to the DTUS overview and DTUS info sheet (pdf) for additional information.

iPath US Treasury 10-year Bull ETN (NYSEARCA:DTYL) seeks to profit from “bullish” moves by increasing about $0.10 in value for every 1 basis point decrease in the yield of 10-year Treasury notes. Refer to the DTYL overview and DTYL info sheet (pdf) for additional information.

iPath US Treasury 10-year Bear ETN (NYSEARCA:DTYS) seeks to profit from “bearish” moves by increasing about $0.10 in value for every 1 basis point increase in the yield of 10-year Treasury notes. Refer to the DTYS overview and DTYS info sheet (pdf) for additional information.

iPath US Treasury Long Bond Bull ETN (NYSEARCA:DLBL) seeks to profit from “bullish” moves by increasing about $0.10 in value for every 1 basis point decrease in the yield of long-term (30-year) Treasury bonds. Refer to the DLBL overview and DLBL info sheet (pdf) for additional information.

iPath US Treasury Long Bond Bull ETN (NYSEARCA:DLBS) seeks to profit from “bearish” moves by increasing about $0.10 in value for every 1 basis point increase in the yield of long-term (30-year) Treasury bonds. Refer to the DLBS overview and DLBS info sheet (pdf) for additional information.

Barclays has a Basics of Yield Curve Strategies (pdf) document for those who wish to learn more about these products.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Source: Barclays Launches Six ETNs for Custom Yield Curve Strategies