iShares iBoxx High Yield Corporate Bond ETF (HYG) short interest is $6.71 billion, 84.25 million shares shorted, 55.72% of the float.
It is the fourth most shorted ETF in the U.S. behind SPY, QQQ and IWM.
Shares shorted were up by 5.2 million shares in December, +6.56%, and we are seeing additional short selling today with over 4 million shares of short activity this morning.
Stock borrow rates are climbing, existing borrows were in the 2.65% fee range, but today we are seeing new stock borrows at 4% fee to 5.5% fee levels.
Traders may be looking for continued selloff in the ETF which will trigger selling in the underlying corporate bonds.
With almost $1.6 billion of outflows already in the ETF in December, additional sales in size will force more selling in the more illiquid and longer dated holdings of the ETF – triggering even greater downside price pressure on the overall bond holdings and the ETF.
Want deeper insight into the above analysis?
Managing Director Predictive Analytics, S3 Partners, LLC
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