These three ETFs are a hedge against rising inflation and bond yields.
Direxion Daily 20 Plus Year Bear 3 Shares (TMV), Proshares Short 20 Plus Year Treasury (TBF), and Proshares Ultrashort Lehman 20 Plus Year (TBT)
from Sound Advice
Bond yields have risen recently as Europe’s QE programs and other expansionary monetary policies in other industrialized nations are getting visible traction. We have also seen sharp fluctuations in the value of the dollar in relation to other currencies, which makes US Treasury bonds hazardous for foreign investors. A relatively small decline in the dollar can wipe out many years of the investment returns.
Rising core inflation has the same adverse impact. The Consumer Price index for April actually declined 0.2%, and weak gasoline prices were cited as the primary cause. However, the so-called core CPI, which strips out food and energy costs, increased 0.3%, for a 3.6% annual rate. The recent core inflation rate wipes out the approximate 3% annual yield from long-term Treasury bonds.
Although bond yields have risen recently, they are still historically low, and the only substantial room for movement is upward.
We continue to recommend three ETFs designed to benefit from the inevitable rise in long-term Treasury bond yields.
These ETFs differ in the amount of leverage used:
Direxion Daily 20 Plus Year Bear 3 Shares (TMV) is up 9.9%.
Proshares Short 20 Plus Year Treasury (TBF) is up 5%, and
Proshares Ultrashort Lehman 20 Plus Year (TBT) Treasury is up 8.8%.
Gray Cardiff, Sound Advice, www.soundadvice-newsletter.com, 800-825-7007, June 24, 2015