Direxion launches inverse & leveraged TIPS ETFs

Apr 13th, 2022 | By | Category: Fixed Income

Direxion has launched a pair of inverse and leveraged ETFs providing tactical exposure to US Treasury Inflation-Protected Securities (TIPS).

Direxion launches inverse & leveraged TIPS ETFs

David Mazza, Managing Director, Head of Product at Direxion.

The Direxion Daily TIPS Bull 2X Shares (TIPL US) and Direxion Daily TIPS Bear 2X Shares (TIPD US) have been listed on NYSE Arca with expense ratios of 1.07% each.

TIPS differ from regular Treasury bonds in that their interest and principal are adjusted periodically to reflect changes in the underlying Consumer Price Index. This feature makes TIPS attractive to investors who wish to invest in US Treasuries while avoiding inflationary risks.

The launch of the ETFs is timely. The US Labor Department recently announced that consumer inflation in the US surged to a four-decade high of 8.5% in March compared to the same month in 2021, driven by skyrocketing energy and food costs.

David Mazza, Managing Director, Head of Product at Direxion, said: “Following decades when inflation was all but non-existent, the prices of everything from cars to computers have jumped in recent months. TIPL and TIPD allow traders to take amplified bullish or bearish positions on the US TIPS market.”

Investment approach

TIPL and TIPD provide +200% and -200%, respectively, of the daily performance of the Solactive TIPS ETF Index which consists of a 100% allocation to the $33.1bn iShares TIPS Bond ETF (TIP US), the largest dedicated TIPS ETF globally.

TIP tracks US dollar-denominated inflation-linked securities issued by the US government. Eligible securities are sourced from across the yield curve. The fund currently has a yield to maturity of 2.68% and an effective duration of 7.35 years.

Inverse and leveraged ETFs are typically suitable only for sophisticated traders who understand the risks involved, in particular how these products tend to decay in value if held for an extended period of time.

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