What ETF tracks rising interest rates?

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Question asked 11/09/2021

What ETF tracks rising interest rates?

Hey James and Team,

I noted that you are now neutral to bullish Australian bond yields. Can you suggest which ETF's would be suited to this scenario eventuating. I have trouble getting my head around higher interest rates means falling bond prices and higher yields. So I assume that I need to be careful not to go long an ETF bond and go into one which moves in line with higher interest rates. Hope that makes sense.

Cheers

Wayne M

Answer

Hi Wayne,

Many years ago I remember having the same problem understanding the inverse correlation between bond prices and interest rates but it will eventually click. This week MM bought the ProShares Short 20+ Year Treasury ETF (USD) for our Global Macro ETF Portfolio – in simple terms if bond yields go back to their levels of February this ETF should rally 15% and obviously much more if we eventually challenge their levels of 2019/20.

We prefer to play our rising bond yield view through the US at present but history shows us that Australian and US yields are closely correlated. There is simply no ETF on the ASX that gives exposure to this theme.

chart

ProShares Short 20+ year US Treasury ETF (TBF US)

LAST UPDATED 10/09/2021 17:29

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