Short interest in the largest investment-grade corporate bond exchange traded fund has reached record levels, reflecting increased bearish short-term bets on the credit market.
The bearish signal in the corporate debt category is a measure of investor sales of shares that they do not hold in the believe that bond prices will fall and they can repurchase the shares at a later date for a lower price.
Some fund managers argue that the increase in short interest reflects investors’ desire to seek a hedge in their corporate debt exposure, the Financial Times reports.
Short interest rose almost 50% to 11.4 million shares in the two weeks ended September 15 for the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD). Short interest in the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) also remained near record high.
Matt Tucker, head of fixed-income strategy for iShares in the Americas, said that it was “unclear” if the rise in short interest was “to create an outright short in the market or to hedge an existing position.”