1. Betashares Geared Short Australian Government Bond Complex ETF (ASX: BBAB)
Exposure: Invests assets in cash and cash equivalents, and sells 10-year Australian Treasury Bond Futures
AUM: A$484,0002
BBAB is a geared bond ETF that gives traders an aggressive way to take short positions on Australian government bonds. Geared also means ‘leveraged’, wherein the ETF borrows funds to amplify profits or losses.
Put simply, where a traditional ETF will try to mimic an index, say, 1:1, a geared ETF will aim for 2:1 or even 3:1.
The fund is, therefore, structured using derivatives, so it doesn’t directly hold bonds. Instead, it tracks futures contracts and uses leverage to magnify exposure. This design makes it highly volatile compared with traditional bond ETFs.
While government bonds themselves are often perceived as ‘defensive,’ leveraged short exposure turns them into a high-risk trading instrument.
Because the fund is volatile, it is better for CFD traders than share traders – it’s made for short-term market movements and presents opportunities to trade intraday.
Highlights:
- Provides opportunities to CFD trade due to interest-rate expectations, Reserve Bank of Australia (RBA) decisions and macroeconomic data
- Not suitable for long-term share traders, as returns compound in unpredictable ways over weeks and months
- The fund is rebalanced to the mid-point when the gearing ratio levels are breached