On Tuesday (4/5/11), ProShares introduced two new ETFs providing inverse exposure to U.S. Treasury securities and allowing investors to potentially profit from rising interest rates. The ProShares UltraShort 3-7 Year Treasury (TBZ) becomes the first U.S.-listed ETF to provide inverse exposure to the 3-7 year segment of the U.S. Treasury market, and it does so with -2x leverage. The ProShares Short 7-10 Year Treasury (TBX) provides unleveraged inverse exposure to the 7-10 year Treasury segment.

ProShares UltraShort 3-7 Year Treasury (TBZ) seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 3-7 Year Treasury Index. The fund is currently achieving its desired exposure with swaps. TBZ has an expense ratio of 0.95%, and additional information is located in the TBZ overview and TBZ prospectus.

ProShares Short 7-10 Year Treasury (TBX) seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the Barclays Capital 7-10 Year U.S. Treasury Index. The fund is currently achieving its desired exposure with swaps. TBX has an expense ratio of 0.95%, and additional information is located in the TBX overview and TBX prospectus.

With the launch of TBZ and TBX, ProShares now has eight inverse bond ETFs. The segment has been quite successful for ProShares, “garnering more than $7 billion of assets since launching less than three years ago,” said Michael L. Sapir, Chairman and CEO of ProShares Advisors. For the most part, those assets are attributable to just four ETFs, as their two inverse corporate bond ETFs were just recently introduced.

Investors and traders need to fully understand the mathematics of daily compounding of leveraged and inverse fund performance before purchasing these types of products. ProShares provides a good starting point with Geared Investing: An Introduction to Leveraged and Inverse Funds (pdf).

Disclosure covering writer, editor, and publisher: 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.