“Hope you are well. On the basis that the Bond (Government) market bull run may well be ending is there an ETF (preferably LN based) that you know of that can be used to take a long term portfolio position on this rather than having to trade the Daily fluctuations to take advantage of what might be one of the trades of the coming year/decade? I have tried to find in the Chart library and online to no avail. Thanks in advance,”

Eoin Treacy's view Thank you for this important question which I'm sure will be of interest to other subscribers. Let us start by saying that while the evidence is not yet conclusive that a secular bear market in Treasury prices has begun, the odds are increasingly moving in favour of that conclusion. This secular move presents opportunities and challenges for the investor not least because we are considering a short position in an interest bearing investment whose yield is likely to increase.

At present interest rates are close to record lows and US 30-year Treasuries are trading in backwardation. Therefore by initiating a long position in an inverse ETF, one is paying management costs, the interest rate and the negative roll yield. Therefore, Treasury prices need to trend downwards for an inverse ETF holding futures to perform. When Treasury prices range, the ETF's value will be at risk of deteriorating because of the costs incurred with holding the short futures position.

If you do wish to participate with ETFs, the db-trackers II US Treasuries Short Daily ETF is listed in the UK. The ticker is XUTS. There are a number US listed alternatives in the Chart Library. TBT is one of the more popular.

Charts of Treasury yields and the Merrill Lynch 10-year+ Total Return Index are useful for observing the progression of a secular bear market in prices. However, investment vehicles will need to be monitored closely because of the above concerns. Inverse futures ETFs were designed primarily for traders and are ill suited to long-term investing. This is a similar condition to commodity futures ETFs.

If one wants to invest in something today which is likely to be competitive with bonds as yields rise, then high yielding equities with a record of increasing dividends and offering leverage to the growth of the global economy should be suitable candidates from a total return perspective. This is one of the reasons why the Autonomies have been such a focus of our research over the last 9 months.