Related: Consider Commodity ETFs to Hedge Potential Market Risks
Telecommunications firms were a larger contributor to the recent weakness, followed by problems in the healthcare segment. Some analysts are also concerned that retail investors, whom have taken on greater exposure to riskier assets in search of yields, may get spooked by the weakness and continue to yank money from the segment.
Junk bond naysayers have been acquiring large positions in big bond-related ETFs, like HYG, to short the debt segment or capitalize off any sudden downturns. For instance, short interest in HYG surged to as high as 24% of shares outstanding last week before the rebound in the underlying index. According to J.P. Morgan strategists an advance above 20% typically reflected a buying opportunity, pointing to past trading trends.
For more information on speculative-debt markets, visit our junk bonds category.