The global race to be first out of the gates with an inverse bond exchange-traded fund was set to be won on Thursday by U.S.-based ProShare Advisors.

But the fast-growing fund provider based in Bethesda, Md., captured first-to-market honors by a whisker. A day earlier, German financial services giant Deutsche Bank announced plans to issue a new ETF in Europe that shorts Eurobonds. (See related article.)

That ETF is yet to hit foreign markets, though. In the meantime, the two for U.S. investors are due to launch the morning of May 1:

• The ProShares UltraShort Lehman 7-10 Year Treasury ETF (AMEX: PST)
• The ProShares UltraShort Lehman 20+ Year Treasury ETF (AMEX: TBT)

Both are designed to deliver twice the inverse of the daily performance of their underlying index. For example, if the Lehman Brothers 7-10 Year U.S. Treasury Index declined by 1% in a day, the UltraShort Lehman 7-10 Year Treasury ProShares should appreciate by 2%, and if the benchmark rose by 1%, the ETF should decline by 2%, before fees and expenses.

With bond funds, of course, the interest earned on cash and financial instruments also figures to contribute to overall performance results.

Whether ProShares can take advantage of such first-to-market status with inverse bonds is still to be seen. But it certainly has proven to be a definitive plus in terms of attracting assets for stock and commodities ETFs.

But a big part of such popularity has been tied to just how much pent-up demand exists. With almost every category of stock ETFs in the red this year (the most notable exception being inverse funds), it seems legitimate to question how much demand will be found immediately for inverse bond products.

Then again, ProShares' new ETFs could offer investors an intriguing way to hedge their long positions.

While bonds generally have made money this year, the ongoing mortgage meltdown has pushed credit markets to extremes. As ratings quality tightened in the past year, prices have been driven up - particularly for investment-grade government-backed securities.

"Because the flight to quality during the credit crunch crisis pushed up Treasury prices, many market watchers are suggesting that investors reconsider their Treasury positions," said Michael Sapir, ProShares chief executive, in a statement.

He also pointed out that Pimco bond maven Bill Gross calls Treasuries "the most overvalued asset in the world, bar none."

The implication is that investors don't need to unload their current investment-grade fixed-income holdings. Instead of selling high, they can choose to use ProShares' new inverse ETFs to neutralize market valuations and protect their portfolios against price fluctuations.

Buying a fund designed to automatically short an index can pose other advantages. Namely, investors can lose only the amount that they invest. If they decide to take short positions themselves in long ETFs, losses can go unchecked. The new ProShares bond ETFs can also be used in vehicles that don't permit margin accounts.

Such strategies, though, can be tricky. It's a common technique used by fixed-income arbitrage hedge fund managers. How widely inverse bond ETFs can be implemented effectively and successfully by retail investors is open to debate.

But there's no doubting that ProShares' family of inverse and leveraged ETFs have become quite popular. As stocks tanked in the early going, ProShares jumped to a big lead in 2008 in terms of net assets gathered. (See related story.)

If the fortunes of bonds turn, certainly more than just market-neutral enthusiasts will take to the new ProShares inverse ETFs. And the company, which started its lineup of ETFs a little more than a year and a half ago, has six more inverse and leveraged bond ETFs in registration. (See related story.)

ProShares now offers 62 ETFs representing around $17 billion in assets under management. It's part of the $24 billion ProFunds Group, which also includes more than 60 ProFunds mutual funds.