Two new leveraged ProShares ETFs came on the market as of Thursday, 1/21/2010. ProShares Ultra 20+ Year Treasury (UBT) and ProShares Ultra 7-10 Year Treasury (UST) both offer 200% leverage to the daily performance of their underlying long-term and intermediate-term Treasury bond indexes.
ProShares already offered three leveraged and unleveraged ETFs tracking Treasury bonds on an inverse basis. Proshares UltraShort 20+ Year Treasury ETF (TBT) has been particularly successful, attracting $4.6 billion in less than two years according to the ProShares news release.
UBT and UST are the firm’s first long-side Treasury offerings. The closest competitors are the 3X leveraged Treasury ETFs from Direxion (TYD and TMF). Both new ProShares funds have annual expense ratios of 0.95%.
As we have discussed before, leveraged ETFs do not necessarily perform the way people anticipate. They can be a useful tool for short-term traders who understand how they work. Investors who intend to hold for more than one day need to understand that the 200% leverage ratio will likely drift higher or lower over longer periods.
In the first day of trading UBT had light volume and UST had no volume at all. Nonetheless, we expect these ETFs to attract an audience in due time. ProShares has proven itself adept at gauging demand for products of this type.
Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.
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