Some data points suggest traders are positioning in bearish in fashion in HYG, the largest junk bond ETF.
“But look closer: Open interest in HYG puts — bearish contracts that permit a holder to sell shares at an agreed-upon price — has also climbed to the highest on record. That can speak either to outright bearish bets or heightened hedging activity by holders,” according to Bloomberg.
Some market observers believe the recent rally in high-yield corporate bonds is reaching the upper end of its near-term capacity and that HYG and JNK could see limited upside in the coming weeks.
For more trends in fixed income, visit the Fixed Income Channel.