ProShares Launches an Inverse High-Yield Bond ETF

Mar.23.11 | About: ProShares Short (SJB)
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ProShares, known for its extensive line of alternative investment styles and a large suite of leveraged and inverse funds, launched its first inverse high-yield bond exchange traded fund (ETF) on Tuesday.

The intent of the new ProShares Short High Yield (NYSEArca: SJB) is to reflect the inverse, or -100%, daily performance of the Markit iBoxx $ Liquid High Yield Index, according to ProShares. The fund has an expense ratio of 0.95%.

Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, stated that “for investors who believe that high yield bonds are ripe for a pullback, SJB can be used to help hedge against or to seek to benefit from potential declines.”

SJB invests in derivatives as a substitute for directly shorting bonds, which should provide inverse exposure to the underlying securities of the Index or to an ETF linked to the Index, as stated by ETF Daily News. The fund will hold short-term cash instruments that have maturity terms of less than 397 days, with high-quality credit profiles.

In the last week alone amid global volatility scares, investors have dumped around $199.1 million in junk bond ETFs, writes Murray Coleman for Barron’s. The average junk bond is yielding a little more than 7% and the spread over Treasuries is at around 4.9%, a little short of the long-term average of 6%.

For more information on high-yield, junk bonds, visit our junk bonds category.

Max Chen contributed to this article.