Europe’s first range of 3x Short Fixed Income ETPs listed; UK’s first ever 10Y US Treasuries 3x short ETP; Demand for short exposure to Fixed Income expected to increase dramatically as rates rise; A staggering 98% of Global AUM for short and…
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Hector McNeil, Co-CEO of BOOST ETP
leverage Fixed Income ETPs is in short ETPs; Global demand for S&L products continues to grow, with $60bn in AUM (June 2014)1.
BOOST ETP announces that it has listed Europe’s first ever 10Y US Treasuries 3x short fixed income ETP on the London Stock Exchange (LSE).
BOOST’s 3x short fixed income ETP listed on the LSE is:
|Boost US Treasuries 10Y 3x Short Daily ETP||3TYS|
The new ETP will track the index giving exposure to returns from holding US 10 year Treasury futures. With AUM of US$7.9 billion, S&L debt ETPs tracking US Treasuries represent the overwhelming majority of S&L debt ETPs globally. This year’s unwinding of QE in the US may have set a precedent for looming interest rate increases as the US economy continues to grow. This, combined with the Fed’s confident tone to end QE by the end of the summer, has driven S&L investors to cut their long position in Treasuries by $659 million and increase their short positions by US$885 million this year (to end of June 2014).1
A strong bearish conviction in US debt is evident in the disproportionate allocation into short positions, which represent 90% of AUM in S&L debt ETPs.1
The fixed income ETP is designed to return minus 3x the daily movement of the relevant benchmark index. For example, if the BNP Paribas US Treasury Note 10y Future Index falls by 1% on a day, then “3TYS ” will rise by 3% on that day (less fees and adjustments). Conversely, if the BNP Paribas US Treasury Note 10y Future Index rises by 1% on a day, then “3TYS” will fall by 3% on that day.
The ETP trade and settle the same as equities and the advantages of 3x short ETPs include:
- trebling daily returns of an investment (less fees and adjustments)
- achieving the same exposure as a delta 1 position with 1/3rd of the capital employed
- hedging existing positions in one simple trade
- using in a long or short strategy to take advantage of any rises or falls in the market
- using in a pairs trade to take advantage of undervalued assets
- getting short the market/asset class quickly, efficiently and cheaply
- enhancing a balanced portfolio by investing a small percentage tactically when short-term opportunities arise.
BOOST’s S&L ETP platform now covers the world’s major asset classes, which include equities, fixed income and commodities.
This brings BOOST ETP’s product range to a total of 79 listings on the London Stock Exchange, Borsa Italiana and Xetra.
Hector McNeil Co-CEO of BOOST ETP, A WisdomTree Company, had this to say:
“It’s very exciting to launch new products especially in new asset classes for the company. The launch of Boost US Treasuries 10Y 3x Short Daily ETP (3TYS) is a first for the LSE and follows closely on the heels of last week’s listing of the Boost Gilts 10Y 3x Short Daily ETP (3GIS). Investors can now use Boost’s un-paralleled range of short & leveraged ETPs to invest in all the major asset classes including equities, commodities and now sovereign fixed income exposures.
Short & leveraged ETPs allow investors to invest in a capital efficient manner and in one simple trade on Exchange and in a central settlement system. Investors also have the security that they can not lose more than their original investment unlike other forms of leverage trading. Investors can also hedge their long positions using short ETPs therefore helping them protect their portfolios in volatile markets. The addition of Boost US Treasuries 10Y 3x Short Daily ETP (3TYS) will allow investors to make positive returns on 10 year US Treasuries is falling. BOOST will continue to innovate through introducing new ETPs, market leading research and client education to ensure investors are as well prepared as they can possibly be.”
Viktor Nossek, Head of Research at BOOST ETP, A WisdomTree Company, commented:
“Growing bearishness of S&L investors on fixed income securities was evident in the $1.1 billion in outflows from long positions, globally. Following these large redemptions, 92% of S&L fixed income ETPs’ AUM is now held in short positions, suggesting S&L investors remain overwhelmingly bearishly positioned.”