Investors can benefit from the expected Treasury selloff by betting against them. This can be done by shorting long-bond ETFs like iShares Barclays 20+ Year Treasury Bond , or by buying inverse or short ETFs like ProShares Short 20+ Year Treasury that aim to deliver the opposite performance of the bonds they’re shorting.
Nicholas Oleson, a financial adviser with Philadelphia Group in King of Prussia, Pa., says inverse ETFs are more liquid and cost efficient than trying to short long-only ETFs.
While rising rates hurt fixed-rate bonds, those with floating interest rates or rates that reset quickly can gain from an increase in borrowing costs. Bond bears say the leveraged loan market is one of the few sectors they like. Floating rate loans adjust their interest rates every 45 to 60 days based on LIBOR , a short-term benchmark rate, and thus pay higher coupons as rates rise.
Short-term bond funds, which invest in bonds, usually notes, maturing in two years or less, can also benefit from replacing maturing bonds with new ones paying higher rates.
Besides the Fed, the European debt crisis has exerted the strongest influence on bond markets. A Greek default in the first half of 2012 seemsimminent. The question is whether it will be controlled or chaotic. Portugal is also teetering, while Italy, Spain and France have been hurt by credit downgrades.Page 3 of 4 | Prev Page | Next Page