Fixed Income ETF Short Interest
Author:
Ihor Dusaniwsky
Managing Director of Predictive Analytics, S3 Partners
Matthew Unterman
Director of Predictive Analytics, S3 Partners
When the Federal Reserve’s FOMC started raising the Federal Funds Target Rate on March 16, 2022, the U.S. Treasury Yield Curve has been volatile, with both shorter-term and longer-term rates fluctuating and eventually inverting. Investors have traded these interest rate fluctuations using the actual fixed income securities or using fixed income ETFs.
We follow 470 U.S. traded fixed income ETFs with short interest to see hedging and alpha generating activity. Short selling is very concentrated in a few fixed income ETFs, with 85% of all fixed income ETF short selling concentrated in the twenty most shorted ETFs.
Fixed Income ETF Short Interest
Ticker
Short Interest
SI % Float
ISHS IBOXX $ HIGH YIELD CORP BOND ETF
HYG
$6,615,974,791
49.07%
ISHS IBOXX $ INV GRD CORP BOND ETF
LQD
$5,268,103,591
18.71%
ISHS 20+ YR TREAS BOND ETF
TLT
$2,877,086,258
7.78%
ISHS 1-3 YR TREASURY BOND ETF
SHY
$1,538,666,722
5.88%
ISHS JPM $ EMERGING MARKETS BOND ETF
EMB
$1,460,533,493
11.02%
ISHS 7-10 YR TREAS BOND ETF
IEF
$1,209,233,709
4.47%
ISHS CORE US AGGREGATE BOND ETF
AGG
$1,078,757,368
1.22%
SPDR BBERG HIGH YIELD BOND ETF
JNK
$989,602,404
13.63%
VNGRD INT-TERM CORP BOND ETF
VCIT
$776,950,208
2.08%
INVESCO SENIOR LOAN ETF
BKLN
$639,757,098
13.71%
ISHS BROAD USD HIGH YIELD ETF
USHY
$527,599,637
5.97%
VNGRD ST CORP BOND ETF
VCSH
$442,871,155
1.23%
SPDR BLACKSTONE SENIOR LOAN ETF
SRLN
$401,707,210
9.35%
VNGRD LONG-TERM CORP BOND ETF
VCLT
$354,886,411
6.41%
ISHS SHORTTERM NATL MUNI BOND ETF
SUB
$253,051,507
2.88%
ISHS NATIONAL MUNI BOND ETF
MUB
$215,204,077
0.63%
ISHS TIPS FUND ETF
TIP
$194,203,285
0.96%
ISHS MBS ETF
MBB
$191,901,577
0.76%
ISHS S&P PREFERRED STOCK ETF
PFF
$180,662,473
1.49%
VNGRD TOTAL BOND MARKET ETF
BND
$156,443,660
0.17%
Top Twenty
$25,373,196,634
20.20%
Total Sector
$29,972,680,128
17.39%
Since the Fed began increasing rates, we have seen overall short interest in fixed income ETFs decline by $4.1 billion, this decline was made up of a -$4.2 billion mark-to-market decline in the value of the ETFs shorted (as rates rise bond prices decline) slightly offset by $110 million of increased short selling. Short sellers were not buying-to-cover, they were holding steady in a downward trending ETF sector and earning mark-to-market profits.
Short Interest
Ticker
3/15/22 Change Short Interest
3/15/22 Change Shares Shorted
3/15/22 Change MTM
ISHS IBOXX $ HIGH YIELD CORP BOND ETF
HYG
$1,707,504,253
($893,578,979)
$2,601,083,233
ISHS IBOXX $ INV GRD CORP BOND ETF
LQD
$510,418,809
$412,173,736
$98,245,073
ISHS 20+ YR TREAS BOND ETF
TLT
$224,974,391
$874,496,095
($649,521,703)
ISHS 1-3 YR TREASURY BOND ETF
SHY
($989,456,587)
$1,011,241,813
($2,000,698,401)
ISHS JPM $ EMERGING MARKETS BOND ETF
EMB
($288,084,448)
$466,777,507
($754,861,955)
ISHS 7-10 YR TREAS BOND ETF
IEF
($192,291,311)
$372,091,569
($564,382,881)
ISHS CORE US AGGREGATE BOND ETF
AGG
($203,209,996)
$325,212,526
($528,422,523)
SPDR BBERG HIGH YIELD BOND ETF
JNK
$1,172,680,499
($930,183,543)
$2,102,864,042
VNGRD INT-TERM CORP BOND ETF
VCIT
($340,141,438)
$396,586,204
($736,727,641)
INVESCO SENIOR LOAN ETF
BKLN
$950,085,430
($917,259,068)
$1,867,344,498
ISHS BROAD USD HIGH YIELD ETF
USHY
($237,315,994)
$266,789,532
($504,105,526)
VNGRD ST CORP BOND ETF
VCSH
$613,012,360
($565,804,647)
$1,178,817,008
SPDR BLACKSTONE SENIOR LOAN ETF
SRLN
$190,046,010
($155,324,046)
$345,370,056
VNGRD LONG-TERM CORP BOND ETF
VCLT
($42,426,458)
$116,088,862
($158,515,320)
ISHS SHORTTERM NATL MUNI BOND ETF
SUB
($238,802,517)
$239,100,293
($477,902,810)
ISHS NATIONAL MUNI BOND ETF
MUB
$169,146,757
($137,728,627)
$306,875,384
ISHS TIPS FUND ETF
TIP
$956,101,276
($730,801,972)
$1,686,903,248
ISHS MBS ETF
MBB
$34,014,565
$1,078,939
$32,935,626
ISHS S&P PREFERRED STOCK ETF
PFF
$103,428,027
($56,079,602)
$159,507,628
VNGRD TOTAL BOND MARKET ETF
BND
$7,997,522
$14,883,440
($6,885,918)
Top Twenty
($4,107,681,150)
$109,760,032
($4,217,441,181)
Total Sector
($4,900,578,442)
($328,308,948)
($4,572,269,494)
Over the last thirty days we have seen $913 million of increased short selling in fixed income ETFs as short sellers tried to replenish their dollar exposure as ETF prices declined.
Short Interest
Ticker
30D Change Short Interest
30D Change Shares Shorted
30D Change MTM
ISHS IBOXX $ HIGH YIELD CORP BOND ETF
HYG
($201,519,781)
$63,660,543
($265,180,323)
ISHS IBOXX $ INV GRD CORP BOND ETF
LQD
$202,856,021
$468,102,728
($265,246,707)
ISHS 20+ YR TREAS BOND ETF
TLT
($479,922,330)
($133,426,650)
($346,495,680)
ISHS 1-3 YR TREASURY BOND ETF
SHY
$341,721,019
$347,189,224
($5,468,205)
ISHS JPM $ EMERGING MARKETS BOND ETF
EMB
($425,162,397)
($319,085,143)
($106,077,254)
ISHS 7-10 YR TREAS BOND ETF
IEF
($20,853,237)
$33,072,703
($53,925,941)
ISHS CORE US AGGREGATE BOND ETF
AGG
($66,108,062)
($22,716,633)
($43,391,429)
SPDR BBERG HIGH YIELD BOND ETF
JNK
($93,746,679)
($51,821,221)
($41,925,458)
VNGRD INT-TERM CORP BOND ETF
VCIT
$192,141,438
$216,000,461
($23,859,023)
INVESCO SENIOR LOAN ETF
BKLN
$56,250,587
$63,157,610
($6,907,023)
ISHS BROAD USD HIGH YIELD ETF
USHY
($103,219,509)
($79,802,884)
($23,416,626)
VNGRD ST CORP BOND ETF
VCSH
$153,977,621
$157,498,402
($3,520,781)
SPDR BLACKSTONE SENIOR LOAN ETF
SRLN
($111,219,000)
($105,581,089)
($5,637,911)
VNGRD LONG-TERM CORP BOND ETF
VCLT
($24,589,103)
$4,862,639
($29,451,742)
ISHS SHORTTERM NATL MUNI BOND ETF
SUB
$72,840,626
$74,579,682
($1,739,056)
ISHS NATIONAL MUNI BOND ETF
MUB
$3,049,348
$10,234,921
($7,185,573)
ISHS TIPS FUND ETF
TIP
($230,658)
$5,332,481
($5,563,139)
ISHS MBS ETF
MBB
$97,710,431
$102,391,551
($4,681,121)
ISHS S&P PREFERRED STOCK ETF
PFF
($54,793,757)
($42,465,987)
($12,327,770)
VNGRD TOTAL BOND MARKET ETF
BND
$120,744,420
$122,077,965
($1,333,544)
Top Twenty
($340,073,002)
$913,261,304
($1,253,334,306)
Total Sector
($1,436,487,081)
($34,501,758)
($1,401,985,323)
Since 3/15/22 fixed income ETF short sellers are up +$4.19 billion in mark-to-market profits and up +$1.01 billion in 2023 year-to-date mark-to-market profits.
Mark-to-Market P\L
Ticker
3/15/22 MTM P\L
P\L %
YTD MTM P\L
P\L %
ISHS IBOXX $ HIGH YIELD CORP BOND ETF
HYG
$617,484,097
9.55%
$50,837,110
0.86%
ISHS IBOXX $ INV GRD CORP BOND ETF
LQD
$1,018,375,002
20.59%
$323,503,205
6.91%
ISHS 20+ YR TREAS BOND ETF
TLT
$1,043,096,725
46.55%
$433,346,318
19.32%
ISHS 1-3 YR TREASURY BOND ETF
SHY
$30,359,406
3.86%
$8,673,569
0.89%
ISHS JPM $ EMERGING MARKETS BOND ETF
EMB
$204,955,413
15.81%
$74,128,656
5.07%
ISHS 7-10 YR TREAS BOND ETF
IEF
$188,470,091
24.31%
$101,480,604
11.19%
ISHS CORE US AGGREGATE BOND ETF
AGG
$133,242,473
14.33%
$54,403,782
5.35%
SPDR BBERG HIGH YIELD BOND ETF
JNK
$241,331,802
15.19%
$7,398,483
0.58%
VNGRD INT-TERM CORP BOND ETF
VCIT
$49,545,573
12.20%
$25,575,658
5.75%
INVESCO SENIOR LOAN ETF
BKLN
($25,863,925)
-2.73%
($28,628,759)
-3.63%
ISHS BROAD USD HIGH YIELD ETF
USHY
$56,656,715
13.90%
$9,967,250
2.60%
VNGRD ST CORP BOND ETF
VCSH
$24,945,538
2.44%
$1,335,988
0.13%
SPDR BLACKSTONE SENIOR LOAN ETF
SRLN
($55,816)
-0.01%
($12,360,100)
-3.16%
VNGRD LONG-TERM CORP BOND ETF
VCLT
$90,267,229
23.49%
$31,988,132
7.44%
ISHS SHORTTERM NATL MUNI BOND ETF
SUB
($1,439,402)
-2.85%
$237,649
0.32%
ISHS NATIONAL MUNI BOND ETF
MUB
$3,924,133
1.26%
($77,772)
-13.34%
ISHS TIPS FUND ETF
TIP
$179,017,785
23.68%
($4,021,993)
-0.81%
ISHS MBS ETF
MBB
$37,959,868
12.58%
$24,662,751
8.39%
ISHS S&P PREFERRED STOCK ETF
PFF
$44,506,345
23.81%
$20,202,774
9.84%
VNGRD TOTAL BOND MARKET ETF
BND
$24,080,220
18.04%
$3,028,775
2.95%
Top Twenty
$3,960,859,272
16.27%
$1,125,682,080
4.87%
Total Sector
$4,187,626,106
13.79%
$1,013,388,070
3.56%
Recently we’ve seen the U.S. yield curve become less inverted with longer dated treasury rates increasing substantially more than shorter term treasury rates.
Treasury Duration
9/5/23 Rate
10/4/23 Rate
Change
1 Month
2.69%
2.69%
0.00%
3 Month
2.25%
2.31%
0.06%
6 Month
1.69%
1.77%
0.08%
1 Year
1.60%
1.63%
0.03%
2 Year
0.78%
0.96%
0.18%
3 Year
0.49%
0.76%
0.27%
5 Year
0.41%
0.85%
0.44%
7 Year
0.49%
0.98%
0.49%
10 Year
0.54%
1.09%
0.55%
30 Year
0.59%
1.16%
0.57%
Shorting the longer-term iShares 20+ Year Treasury Bond ETF (TLT) and going long the shorter-term iShares 1-3 Year Treasury Bond ETF (SHY) was the obvious maturity play over the last thirty days. The TLT ETF was down -10.03% over the last month, returning a short P\L of +9.73% after stock borrow costs and going long the SHY ETF returned a loss of -0.20%, going long and short the two ETFs netted a total return of +9.53% over the last thirty days.
If an investor wanted to employ leverage, they could have bought the ProShares UltraShort 20+ year Treasury ETF (TBT) for a +24.05% gain and bought the ProShares Ultra 7-10 Year Treasury ETF (UST) for a -8.57% loss and netted a +15.48% return over the last thirty days.
We are seeing recent short covering in the longer-term TLT ETF and short selling in the shorter-term SHY ETF which may be an indication that investors are looking for the yield curve inversion to get flatter or return to its “more normal” non-inverted shape. Short side activity in different maturity and different investment grade fixed income ETFs can give us insight into the market’s perspective of future Federal Reserve FOMC rate moves.
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