Betting Against Bonds Might Finally Work Later This Year (TBT)

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Since last week’s FOMC decision to raise target interest rates again, we have seen bond prices rally (yields fall), pulling bond ETFs such as TLT (iShares 20+ Year Treasury Bond, Expense Ratio 0.15%) with them.

TLT in fact traded at its highest levels yesterday since Trump’s election last November, but we have seen some moderate outflows in the product with portfolio managers likely taking some profits here (over $500 million out via redemptions).In what is likely related trading, we have also seen some options activity in a popular “Bear” fund known as TBT (ProShares UltraShort 20+ Year Treasury, Expense Ratio 0.93%, $2 billion in AUM). TBT, being an inverse fund structured to provide two times the inverse daily return of the same index that TLT tracks, of course, is also trading at or near its lowest levels since before the Trump election as one might expect.

Along with the recent TLT outflows we have seen some nibbling on call options in TBT. The July 34.50 calls have traded more than 12,000 times today, and these are now slightly in-the-money on a move higher in TBT (and a move lower in Treasury Bond prices in early trading).

These options have a month or so left until expiration and given the post FOMC rate decision move we have seen in the bond markets, this type of trading certainly makes us pay attention.Other “Bear” Treasury funds that could benefit if Treasuries suddenly pull back in price (and yields rise) include TBF (ProShares Short 20+ Year Treasury, Expense Ratio 0.94%, $648 million in AUM), TMV (Direxion Daily 20+ Year Treasury Bear 3X, Expense Ratio 1.05%, $397 million in AUM), TYBS (Direxion Daily 20+ Year Treasury Bear 1X, Expense Ratio 0.50%, $5.1 million in AUM).

Although portfolio managers and traders whom were early to the “interest rates are rising” party in 2017 whom may have purchased ETFs like the aforementioned or TBT are largely “wearing it” currently (TBT over $193 million in year-to-date), the call activity in the fund may be well-timed, given relative levels here.

Only time will tell if the current trend of higher bond prices and lower yields will continue or reverse sharply going into the summer.


The ProShares UltraShort Lehman 20+ Year ETF (NYSE:TBT) was trading at $34.76 per share on Wednesday morning, up $0.09 (+0.26%). Year-to-date, TBT has declined -14.85%, versus a 8.68% rise in the benchmark S&P 500 index during the same period.

TBT currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #6 of 21 ETFs in the Inverse Bonds ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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