ProShares launches “breakeven inflation” ETFs

Jan 13th, 2012 | By | Category: Fixed Income

ProShares, the US-based issuer behind a range of geared and inverse ETFs, has launched an innovative pair of funds that enable investors to take a bet on US inflation expectations by pairing exposure of 30-year Treasury bonds with Treasury Inflation Protected Securities (TIPS).

ProShares launches "breakeven inflation" ETFs

ProShares launches "breakeven inflation" ETFs.

The two funds, the ProShares 30 Year TIPS/TSY Spread ETF (NYSE: RINF) and the ProShares Short 30 Year TIPS/TSY Spread ETF (NYSE: FINF), are the first such ETFs to provide exposure to so-called breakeven inflation, a widely followed measure of inflation expectations

Breakeven inflation aims to isolate the market’s expectation of inflation implied by the difference in yields between TIPS and Treasury bonds.

The two ETFs are linked to the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index, which tracks the returns of a long position in 30-year TIPS and a short position in Treasury bonds.

The long ETF (RINF) seeks to match the performance of the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index, before fees, while the short ETF (FINF) provides the inverse.

“Many investors are focused on inflation and closely follow breakeven inflation, a common yardstick for inflation expectations,” said Michael L. Sapir, Chairman and CEO of ProShare Advisors.  “We are pleased to offer investors the first ETFs linked to this important economic indicator.”

The ProShares funds are a reflection of investors’ increasing appetite for inflation-linked strategies as they seek ways to position their portfolios for future inflation/deflation prospects.

Until now, this kind of strategy was only available to investors via an ETN from Deutsche Bank and Invesco PowerShares, after the two companies teamed-up back in December to launch a pair of inflation/deflation-linked ETNs.

The funds are listed on NYSE Arca and each have an annual expense ratio of 0.75%.

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