Trending
Blame it on the war in Iran – seriously, that’s favored, primary culprit – but 10-year Treasury yields are higher since the start of 2026 with the bulk of that bad news accruing since the start of the conflict in the Middle East.
That’s been a drag on some fixed income strategies and making matters worse for bond investors is the fact that surging inflation caused higher energy prices at the hands of the war limits the Federal Reserve’s ability to lower interest rates. Fed funds futures confirm as much with those derivatives implying essentially no chance the central bank will cut rates this month or in July.
Stocks haven’t bothered by 10-year yields’ ascent as highlighted by the fact the S&P 500 is up 10.35% year-to-date. Obviously, that’s impressive, but there are ways to profit from rising Treasury yields that approachable for a broad swath of clients. Just look at the ProShares Equities for Rising Rates ETF (EQRR).
As highlighted by year-to-date gain of 27.04%, according to Y Charts data, EQRR isn’t a gimmick ETF. Rather, it’s delivering as advertised.
Examining EQRR
EQRR, which turns nine years old next month, tracks the Nasdaq U.S. Large Cap Equities for Rising Rates Index. Both the index and the ETF are easy to understand: they’re comprised of sectors that typically aren’t intimately correlated to 10-year yield fluctuations.
So of the 11 global industry classification sectors (GICS) sectors, just five are represented in EQRR. That’s not to say the other six are all rate-sensitive. They’re not. But EQRR’s objective is delivering to investors a basket of stocks with the potential to thrive when rates rise. That turns up a portfolio that’s approximately 75% comprised of technology, energy and financial services stocks.
A nearly 24% weight to energy stocks, or more than 7x what the S&P 500 allocates to that sector, is turning EQRR into a wartime beneficiary, but keeping the focus on rates, the ETF proves stocks, well the right stocks, can be ideal hedges when rates rise.
“The impact of rising rates on bonds is simple—when yields go up, prices go down. For stocks, it’s less clear,” notes Simeon Hyman of ProShares. “Higher interest rates make future earnings and cash flows worth less, but unlike a bond whose interest payments are fixed, stocks may grow their earnings and cash flow over time. That’s why stocks could be a quintessential hedge against both inflation and rising rates. But only some stocks possess characteristics needed to thrive during a period of rising rates.”
EQRR Matters Now
Clearly, the current environment is hospitable to EQRR, but 2026 isn’t a one-off. The ETF has lived up to expectations during previous rise rate regimes.
(Image: ProShares)
Something else to consider: it’s possible 10-year yields will continue climbing. Hopefully, that won’t happen, but it’s also hard to ignore the possibility of 5% coming into play. That could be a catalyst for use of EQRR as a complement to other equity strategies.
“Yields can go higher. In fact, a 10-year Treasury yield of around 4.5% reflects well-anchored longer-term inflation. The average real yield on the 10-year Treasury is around 2-2.5%,” adds Hyman. “Therefore, a 4.5% yield reflects inflation expectations of 2-2.5%. That’s only slightly higher than the Fed’s 2% target, and it’s exactly why those yields may climb again.”
Related: Beyond Semiconductors: The Hidden Winners of the Data Center and AI Expansion