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Top 5 Inverse/Leveraged ETFs of Last Week

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Last week was quite a lull for Wall Street. The S&P 500 was down 0.7%, the Dow Jones was up 0.1%, the Nasdaq Composite Index lost 1.6% and the small-cap index Russell 2000 was off about 1%. A jump in U.S. treasury yields can be held responsible for such a performance. However, value stocks benefited for such rise in yields and the Dow Jones – the main laggard of the coronavirus crisis benefited a bit.

The yield on the benchmark 10-year Treasury note surged to a one-year high of 1.36% last week and ended the week on 1.34%, aided by expectations that a vaccination program and fat fiscal stimulus under the Biden presidency would boost economic growth. Benchmark U.S. treasury yield gained about 14 bps last week.

Against this backdrop, we highlight a few inverse/leveraged ETFs from last week.

Microsectors 3X U.S. Big Banks ETN (BNKU - Free Report) – Up 22.3%

The underlying Solactive MicroSectors U.S. Big Banks Index, an equal-dollar weighted index, seeks to provide exposure to the 10 largest U.S. banks and financial services companies.It has gained from the steepening yield curve trend. The 10-year U.S. treasury yields strongly rebounded while a dovish Fed kept shoer-term rates subdued. This has boosted banks’ ability to earn higher interest rate margin. This, in turn, has clearly benefited bank stocks.

Microsectors U.S. Big Oil Index 3X ETN (NRGU - Free Report) ) – Up 18.75%

Oil prices staged a rally last week.  A cold snap shut wells and refineries in Texas, the biggest crude producing state in the United States. This is because “water is produced along with oil, that water can freeze up equipment,” oil analyst Andy Lipow wrote over the weekend, as quoted on CNBC. NRGU gained the most in the space (read: Will the Energy ETFs See a Sustained Rally?).

Microsectors Gold Miners -3X ETN (GDXD - Free Report) ) – Up 18.2%

Gold has been underperforming lately. The reason for gold’s underperformance has been the strength of the greenback in recent sessions and the vaccine rally that has bolstered the stock market. Moreover, oil prices have gained lately, which is another headwind for gold miners as oil is a key input. These factors made this inverse gold mining ETF a winner last week (read: Fearing Volatility in Gold? Bet on This New ETF WGLD).

S&P 500 High Beta Bull 3X Direxion (HIBL - Free Report) ) – Up 12.7%

Earnings growth for Q4 turned modestly positive, following three straight quarters of a decline. Plus, growing launches and vaccine rollouts, and easing lockdown restrictions boosted risk-on trade sentiments. The latest fund manager survey by BofA Global Research showed “a record in the net percentage of investors taking higher-than-normal risk, cash allocations at their lowest level since March 2013 and allocations to stocks and commodities at their highest point in around a decade,” as quoted on Reuters. HIBL was thus a winner last week.

Ultrapro Short 20+ Year Treasury Proshares (TTT - Free Report) ) – Up 12.0%

The ProShares UltraPro Short 20+ Year Treasury seeks daily investment results, before fees and expenses that correspond to three times the inverse of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index.

Last week, the 10-year Treasury yield marked the biggest daily jump (up by 10 bps) in more than three months on Feb 16. The 30-year U.S. yield also rose, touching a one-year high of 2.095% on Feb 16. Since yields and bond prices are inversely related, treasuries underperformed last week and the inverse-leveraged fund TTT gained (read: 5 ETFs to Benefit From Treasury Yield Surge).

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