ProShares Trust UltraShort Lehman 7-10 Year Treasury (PST) seeks to deliver twice the inverse daily performance of the Lehman Brothers 7-10 Year Treasury Index, which measures intermediate-term U.S. government bonds with maturities between 7-10 years. This leveraged inverse bond ETF profits when Treasury prices fall and interest rates rise.
How It Works
PST uses derivatives including swaps and futures contracts to achieve -200% daily exposure to its benchmark index, meaning it aims to gain 2% when the underlying Treasury index falls 1%. The fund rebalances daily to maintain its target leverage ratio, using a rules-based approach managed by ProShares. Holdings consist primarily of derivative instruments rather than actual bonds, with positions reset each trading day to maintain the inverse leveraged exposure regardless of market movements.
Key Features
- Provides amplified gains when intermediate Treasury bonds decline, offering 2x inverse exposure for tactical interest rate positioning
- Daily rebalancing maintains consistent -200% target exposure regardless of underlying Treasury index performance volatility
- Focuses specifically on 7-10 year maturity segment, avoiding longer-duration bonds that exhibit higher interest rate sensitivity
Risks
- This ETF can lose value rapidly if Treasury bonds rise, with potential for 20-40% daily losses during bond rallies due to 2x leverage amplification
- Daily reset causes compounding decay over time—if bonds fall 10% then rise 10%, the ETF does not return to break-even due to mathematical compounding effects
- Interest rate cuts or flight-to-safety events can drive Treasury prices higher, causing severe losses as this fund bets against bond performance
Who Should Own This
Best suited for sophisticated traders with high risk tolerance seeking short-term (hours to days) tactical bets against intermediate Treasury bonds during rising rate environments. Requires active monitoring and should represent less than 5% of portfolio allocation. Unsuitable for buy-and-hold investors due to daily reset compounding effects that erode returns over extended periods.