Lyxor has a first of its kind ETF in Europe that delivers positive returns when two-year Treasury yields steepen against 10-year yields.
The Lyxor US Curve Steepening 2-10 UCITS ETF (STPU) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.40%.
Synthetically replicated, STPU tracks the performance of the Solactive USD Daily (x7) Steepener 2-10 index.
The index’s returns are based on two components; a long position in the two-year US Treasury Bond Futures and a short position in the 10-year US Treasury Ultra Bond Futures.
Therefore, when the two-year and 10-year section of the yield curve inverts, STPU will rise.
Because the ETF is seven times leveraged, for every 0.01% increase in the yield curve, STPU will return roughly 0.07%.
The launch is a timely one considering the US Treasury yield curve is at its flattest level since 2007 with many market participants predicting short-dated bonds could outperform long-dated bonds in the near future.
Adam Laird, head of ETF strategy for northern Europe at Lyxor, commented: "Eyes are on central banks at the moment – who have the ability to make or break a fixed income portfolio.
"At Lyxor we are always looking for innovative ways to help investors protect and profit from bonds. Expect more innovations from us in the coming weeks and months."
STPU is domiciled in Luxembourg, where Lyxor has been relocating its entire ETF range.