Inflation is the most likely trigger of higher rates, so any investor bearish on fixed income will want to allocate bond assets to investments that hedge inflation, such as TIPS, formally known as Treasury Inflation Protected Securities.
Fixed-income securities that perform well in a rising rate environment such as floating-rate loans and short-term bonds are also recommended.
U.S. Treasuries should bear the brunt of rising rates, while the debt of European governments are likely to suffer from the ongoing crisis there. Both of these risks can be managed through short selling.
ProShares UltraShort 20+ Year Treasury, an ETF that handles the short selling itself, is the most popular vehicle to bet against Treasurys, while investors with margin accounts can short sell European debt on their own.