ProShares' New Breakeven Inflation ETFs

Includes: FINF, RINF
by: Tom Lydon

ProShares on Thursday launched two new unleveraged exchange traded funds, one long and one short, that provide exposure to the breakeven inflation level.

The indicator is used to quantify inflation expectations. Specifically, it is the spread difference in yields between normal Treasuries and Treasury Inflation-Protected Securities, or TIPs, of similar duration. By taking the spread differential, investors may determine how much influence inflation has on Treasury yields.

ProShares 30 Year TIPS/TSY Spread (NYSEARCA:RINF) and ProShares Short 30 Year TIPS/TSY Spread (NYSEARCA:FINF) both try to reflect the performance of the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index, except the FINF fund tries to provide the inverse of the daily result of the underlying index.

The index takes a long position in 30-year TIPS and a short position in Treasury bonds. If the breakeven rate of inflation rises, the index should perform. If the yield on Treasuries rises, or prices decrease, relative to the yield on TIPs, the breakeven inflation level will increase.

Both funds have an expense ratio of 0.75%. ProShares is the fourth-largest ETF and best known for its inverse and leveraged products.

“Many investors are focused on inflation and closely follow breakeven inflation, a common yardstick for inflation expectations,” Michael Sapir, ProShares chief executive, said in a press release. “We are pleased to offer investors the first ETFs linked to this important economic indicator.”

State Street Global Advisors has also filed with the SEC to launch a breakeven inflation ETF. [State Street Plans Active ETFs, Breakeven Inflation Fund]
Max Chen contributed to this article.

Disclosure: None