ProShares, the largest issuer of inverse and leveraged ETFs, continues to build out the portion of its product lineup offering opportunities to gain short exposure to fixed income securities. The new Short Investment Grade (IGS) will seek to deliver daily results that correspond to the inverse of the iBoxx $ Liquid Investment Grade Index, a benchmark that is a modified market-value weighted index designed to provide a balanced representation of U.S. dollar-denominated investment grade corporate bonds. That benchmark serves as the underlying to the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD), which has nearly $13 billion in assets.
“There are signs that investment grade corporate bonds could possibly be richly valued relative to historical levels. Since the financial crisis, investment grade corporate bond indexes have reached record highs, and credit spreads have tightened significantly,” said Michael L. Sapir, chairman and CEO of ProShare Advisors LLC, ProShares’ investment advisor. “For investors who believe that investment grade corporates could come under pressure, IGS can be used to help hedge against or to seek to benefit from potential declines.”
The latest addition to the ETF lineup helps to fill out the ProShares suite of inverse bond ETFs. The company recently launched the first product offering inverse exposure to junk bonds, the Short High Yield product (SJB). In addition, ProShares offers a Short 20+ Year Treasury (TBF) and a handful of products offering -2x daily exposure to various corners of the Treasury market.
March has been the month of inverse bond ETF launches. In addition to IGS and SJB, Direxion launched ETFs offering daily inverse exposure to the aggregate investment grade bond market (SAGG), intermediate Treasuries (TYNS), and long-dated Treasuries (TYBS). Tightening credit spreads have sparked anxiety over the short-term outlook for investment grade corporate bonds and high yield debt, while worries about rate hikes to keep accelerating inflation in check have dimmed the outlook for any fixed income securities with extended durations.
Disclosure: No positions at time of writing.
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