Fixed Income ETF Short Selling Recap

Author:

Ihor Dusaniwsky

Managing Director of Predictive Analytics, S3 Partners

Matthew Unterman

Director of Predictive Analytics, S3 Partners

May 26, 2022

We cover 372 Fixed Income ETFs with active shares shorted with $31.3 billion of short interest. Average Short Interest % of Float is 21.61% and S3 SI % Float (which includes synthetic longs created by every short sale in the Float number) is 15.64%, while the average stock borrow fee is 1.86%. As a comparison, there are 3,448 U.S. ETFs with $249 billion of total short interest, with an average 21.85% SI % Float, 15.21% S3 SI % Float and average stock borrow fee of 1.06%.

Fixed Income ETF Short Interest (as of 05.26.22)

Name

Ticker

SI % Float

S3 SI % Float

Fee

Short Interest

ISHS IBOXX $ HIGH YIELD CORP BOND ETF

HYG

53.86%

35.01%

2.32%

$7,479,367,052

ISHS IBOXX $ INV GRD CORP BOND ETF

LQD

17.51%

14.90%

1.07%

$5,759,661,414

SPDR BBERG HIGH YIELD BOND ETF

JNK

34.41%

25.60%

4.07%

$2,192,437,042

ISHS 20+ YR TREAS BOND ETF

TLT

9.71%

8.85%

0.30%

$1,945,002,474

ISHS TIPS FUND ETF

TIP

4.09%

3.93%

0.30%

$1,302,557,589

INVESCO SENIOR LOAN ETF

BKLN

25.42%

20.27%

3.82%

$1,215,506,317

VNGRD ST CORP BOND ETF

VCSH

2.48%

2.42%

1.57%

$1,007,228,035

ISHS CORE US AGGREGATE BOND ETF

AGG

1.16%

1.14%

0.30%

$951,840,092

ISHS 7-10 YR TREAS BOND ETF

IEF

4.22%

4.05%

0.57%

$764,277,561

XTRACKERS $ HIGH YIELD CORP BOND ETF

HYLB

19.74%

16.48%

1.69%

$729,045,527

ISHS NATIONAL MUNI BOND ETF

MUB

1.87%

1.84%

7.32%

$510,063,688

ISHS 13 YR TREASURY BOND ETF

SHY

2.04%

2.00%

0.82%

$499,021,029

ISHS SHORT TERM CORP BOND ETF

IGSB

2.11%

2.06%

0.82%

$453,006,837

ISHS BROAD USD HIGH YIELD ETF

USHY

6.51%

6.11%

1.69%

$420,891,817

VNGRD SHORT-TERM BOND ETF

BSV

0.85%

0.84%

1.19%

$335,762,960

VNGRD LONG-TERM CORP BOND ETF

VCLT

7.47%

6.95%

0.94%

$318,697,299

VNGRD INT-TERM CORP BOND ETF

VCIT

0.72%

0.71%

0.30%

$303,206,928

VNGRD TOTAL BOND MARKET ETF

BND

0.32%

0.32%

0.30%

$257,459,352

VANECK FALLEN ANGEL H.Y. BOND ETF

ANGL

6.69%

6.27%

0.94%

$223,240,702

VNGRD SHORT-TERM TIPS ETF

VTIP

0.90%

0.89%

0.57%

$187,948,045

INVESCO TAXABLE MUNI BOND ETF

BAB

9.95%

9.05%

1.44%

$181,717,688

ISHS SHORT TREASURY BOND ETF

SHV

0.84%

0.83%

0.57%

$169,356,159

ISHS S&P PREFERRED STOCK ETF

PFF

1.10%

1.09%

1.19%

$168,257,834

SCHWAB US TIPS ETF

SCHP

1.00%

0.99%

0.30%

$160,228,084

SPDR PORTFOLIO LONG TERM TREAS ETF

SPTL

2.79%

2.71%

0.30%

$153,429,538

Total Fixed Income ETF Short Interest

21.61%

15.64%

1.86%

$31,326,241,661

Overall Fixed Income ETF short exposure decreased from $33.4 billion to $33.3 billion, a decrease of $2.1 billion, or -6.2%, over the last 30 days. Change in short interest consists of mark-to-market price changes of existing shorts and short selling and covering. Over the last 30 days we saw a $993 million decrease in the market-to-market value of existing short positions which was joined by $1.08 billion new net short covering.

As the value of their assets declined, a profitable market move for the short-side, ETF short sellers bought to cover and reduced their overall ETF exposure. This indicates that ETF short sellers were looking to decrease their exposure as the markets declined, either decreasing their outstanding portfolio hedges or reducing short-side risk (Alpha generating) positions.

On the short-selling side the ETF with the largest amount of new short selling was the Vanguard Short-Term Bond ETF (BSV).

On the short-covering side we saw the largest activity in three of the four largest Fixed Income ETFs, the iShares iBoxx $ High Yield Corp Bond ETF (HYG), the iShares 20+ Treasury Bond ETF (TLT) and Spider Bloomberg High Yield Bond ETF (JNK). The one Fixed Income ETF of the top four most shorted with increased short selling over the last thirty days was the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD).

Fixed Income ETF short sellers were reducing exposure most of the largest and most liquid ETFs which are the primary portfolio hedging securities used by hedge funds.

30 Day Change in Shares Shorted (as of 05.26.22)

Name

Ticker

Short Interest

30D Change Shares Shorted

VNGRD SHORT-TERM BOND ETF

BSV

$335,762,960

$310,677,696

ISHS IBOXX $ INV GRD CORP BOND ETF

LQD

$5,759,661,414

$174,340,498

ISHS NATIONAL MUNI BOND ETF

MUB

$510,063,688

$169,520,521

VNGRD TOTAL BOND MARKET ETF

BND

$257,459,352

$154,185,883

VNGRD SHORT-TERM TIPS ETF

VTIP

$187,948,045

$150,501,874

ISHS CORE US AGGREGATE BOND ETF

AGG

$951,840,092

$139,481,285

VANECK FALLEN ANGEL HIGH YIELD BOND ETF

ANGL

$223,240,702

$113,580,435

SPDR PORT INTERMEDIATE TERM CORP BOND ETF

SPIB

$153,423,307

$108,510,604

VNGRD ST CORP BOND ETF

VCSH

$1,007,228,035

$105,855,063

XTRACKERS $ HIGH YIELD CORP BOND ETF

HYLB

$729,045,527

$102,970,427

Name

Ticker

Short Interest

30D Change Shares Shorted

ISHS IBOXX $ HIGH YIELD CORP BOND ETF

HYG

$7,479,367,052

$(1,041,309,466)

ISHS 20+ YR TREAS BOND ETF

TLT

$1,945,002,474

$(881,113,614)

SPDR BBERG HIGH YIELD BOND ETF

JNK

$2,192,437,042

$(510,472,412)

ISHS 7-10 YR TREAS BOND ETF

IEF

$764,277,561

$(165,330,870)

VNGRD MORTGAGE-BACKED SECURITIES ETF

VMBS

$20,120,396

$(132,018,059)

VNGRD INT-TERM CORP BOND ETF

VCIT

$303,206,928

$(88,255,196)

ISHS SHORT TREASURY BOND ETF

SHV

$169,356,159

$(81,361,281)

ISHS US TREASURY BOND ETF

GOVT

$25,179,944

$(79,915,123)

ISHS MBS ETF

MBB

$145,985,667

$(65,523,777)

ISHS FLOATING RATE BOND ETF

FLOT

$85,058,622

$(61,802,403)

ETF short interest as a % of Float is a much more fluid metric than it is for equities and ADRs as ETFs are constantly created and\or redeemed which changes their shares outstanding\float numbers sometimes daily. The following are ETFs with the highest SI % Float with overall short interest greater than $5 million.

Traditional Short Interest vs S3 Short Interest (as of 05.26.22)

Name

Ticker

SI % Float

S3 SI % Float

Fee

Short Interest

ISHS IBOXX $ HIGH YIELD CORP BOND ETF

HYG

53.86%

35.01%

2.32%

$7,479,367,052

SPDR BBERG HIGH YIELD BOND ETF

JNK

34.41%

25.60%

4.07%

$2,192,437,042

INVESCO SENIOR LOAN ETF

BKLN

25.42%

20.27%

3.82%

$1,215,506,317

XTRACKERS $ HIGH YIELD CORP BOND ETF

HYLB

19.74%

16.48%

1.69%

$729,045,527

ISHS IBOXX $ INV GRD CORP BOND ETF

LQD

17.51%

14.90%

1.07%

$5,759,661,414

ISHS IBONDS DEC 2028 ETF

IBDT

16.01%

13.80%

9.07%

$66,362,063

VVECTORS SHORT DUR HIGH YIELD MUNI ETF

SHYD

13.38%

11.80%

0.69%

$51,509,933

INVESCO TAXABLE MUNI BOND ETF

BAB

9.95%

9.05%

1.44%

$181,717,688

ISHS 20+ YR TREAS BOND ETF

TLT

9.71%

8.85%

0.30%

$1,945,002,474

SPDR BBERG 3-12 MONTH T-BILL ETF

BILS

9.38%

8.58%

0.30%

$7,029,168

PROSHS ULTRA 2X 20+ YR TREAS ETF

TBT

7.96%

7.37%

6.32%

$110,664,918

VNGRD LONG-TERM CORP BOND ETF

VCLT

7.47%

6.95%

0.945

$318,697,299

VANECK FALLEN ANGEL H.Y. BOND ETF

ANGL

6.69%

6.27%

0.94%

$223,240,702

ISHS BROAD USD HIGH YIELD ETF

USHY

6.51%

6.11%

1.69%

$420,891,817

PIMCO SHORT TERM MUNICIPAL BOND ETF

SMMU

5.82%

5.50%

0.30%

$30,496,110

SPDR BARCLAYS 110 YEAR TIPS ETF

TIPX

5.57%

5.28%

0.30%

$80,707,564

DRXN DAILY 20 YR TREASURY BEAR 3X ETF

TMV

5.38%

5.10%

17.07%

$30,168,068

AMER CENTURY DIV MUNI BOND FUND

TAXF

5.29%

5.02%

0.57%

$11,247,546

ISHS IBONDS DEC 2023 TERM TREASURY ETF

IBTD

5.24%

4.98%

10.07%

$ 7,746,931

ISHS AGENCY BOND ETF

AGZ

4.33%

4.15%

3.07%

$27,883,254

ISHS 7-10 YR TREAS BOND ETF

IEF

4.22%

4.05%

0.57%

$764,277,561

ISHS TIPS FUND ETF

TIP

4.09%

3.93%

0.30%

$1,302,557,589

PIMCO 0-5 YEAR H.Y. CORP BOND INDEX ETF

HYS

4.05%

3.89%

1.19%

$62,019,255

PIMCO 25+ YR ZERO COUPON US TREAS ETF

ZROZ

3.72%

3.59%

14.82%

$14,355,104

ISHS CORE GNMA BOND ETF

GNMA

3.67%

3.54%

0.57%

$12,937,022

ETF stock borrow fees rarely get very expensive (over 5% fee) as brokers will usually create ETF shares in order to meet stock borrow demand as rates make the share creation and hedging profitable. Rates in certain ETFs tend to climb for two main reasons, there is very little marginable or rehypothicatable stock in the market which limits the stock lending availability pool or the process of creating and hedging the ETF is difficult or very expensive (active ETFs or ETF with illiquid constituents). The following are ETFs with the highest stock borrow fees with short interest over $5 million.

Fixed Income ETFs with the Highest Borrow Fee (as of 05.26.22)

#

Name

Ticker

SI % Float

S3 SI % Float

Fee

Short Interest

1

VANECK INTERMEDIATE MUNI ETF

ITM

0.48%

0.48%

21.07%

$8,272,482

2

DRXN DAILY 20 YR TREASURY BEAR 3X ETF

TMV

5.38%

5.10%

17.07%

$30,168,068

3

PIMCO 25+ YR ZERO COUPON US TREAS ETF

ZROZ

3.72%

3.59%

14.82%

$14,355,104

4

VANECK HIGHYIELD MUNI INDEX ETF

HYD

1.10%

1.08%

13.82%

$32,623,969

5

FIRST TRUST MANAGED MUNICIPAL ETF

FMB

0.27%

0.27%

11.32%

$5,385,015

6

INVESCO NATIONAL AMT-FREE MUNI BOND ETF

PZA

0.26%

0.26%

10.32%

$5,291,330

7

ISHS IBONDS DEC 2023 TERM TREASURY ETF

IBTD

5.24%

4.98%

10.07%

$7,746,931

8

ISHS IBONDS DEC 2028 ETF

IBDT

16.01%

13.80%

9.07%

$66,362,063

9

ISHS ESG AWARE 15 YEAR USD CORP BOND ETF

SUSB

0.55%

0.54%

8.82%

$5,318,079

10

SPDR NUVEEN BBERG MUNI BOND ETF

TFI

0.73%

0.72%

8.32%

$28,706,283

11

INVESCO VARIABLE RATE PREFERRED ETF

VRP

0.58%

0.58%

7.57%

$11,034,858

12

ISHS NATIONAL MUNI BOND ETF

MUB

1.87%

1.84%

7.32%

$510,063,688

13

DRXN DAILY 20 YR TREAS BULL 3X ETF

TMF

3.12%

3.03%

7.07%

$10,069,547

14

SPDR NUVEEN S&P HIGH YIELD MUNI BOND ETF

HYMB

1.10%

1.09%

6.82%

$17,391,259

15

PROSHS ULTRA 2X 20+ YR TREAS ETF

TBT

7.96%

7.37%

6.32%

$110,664,918

16

PIMCO 15 YEAR US TIPS ETF

STPZ

1.29%

1.27%

6.32%

$20,085,322

17

SPDR NUVEEN BBERG BARC ST MUNI BOND ETF

SHM

0.17%

0.17%

6.32%

$8,327,052

18

VNGRD TAX-EXEMPT BOND INDEX ETF

VTEB

0.80%

0.79%

6.07%

$127,541,431

19

FIRST TRUST MUNICIPAL HIGH INCOME ETF

FMHI

3.30%

3.19%

5.07%

$9,662,991

20

ISHS SHORT-TERM NATIONAL MUNI BOND ETF

SUB

0.09%

0.08%

5.07%

$6,810,978

21

PROSHS ULTRAPRO SHORT -3X 20+ YEAR TREASURY ETF

TTT

2.24%

2.19%

4.82%

$8,617,233

22

VNGRD EXTENDED DUR TREAS ETF

EDV

1.52%

1.50%

4.57%

$17,418,514

23

SPDR BBERG HIGH YIELD BOND ETF

JNK

34.41%

25.60%

4.07%

$2,192,437,042

24

INVESCO SENIOR LOAN ETF

BKLN

25.42%

20.27%

3.82%

$1,215,506,317

25

ISHS TREASURY FLOATING RATE ETF

TFLO

1.25%

1.23%

3.32%

$15,228,914

SI % Float and stock borrow costs are just two of the variables in our multi-factor Crowded Score metric along with the overall size of the short, stock borrow liquidity and trading liquidity. The four Fixed Income ETFs with the highest Crowded Scores have stock borrow fees between 2% and 4%, S3 SI Float between 17% and 35%, Days to Cover between 2 and 7 and stock borrow utilization over 90%.

Most Crowded Fixed Income ETFs (as of 05.26.22)

#

Name

Ticker

SI % Float

S3 SI % Float

Short Interest

S3 Crowded Score

1

ISHS IBOXX $ HIGH YIELD CORP BOND ETF

HYG

53.86%

35.01%

$7,479,367,052

87.50

2

SPDR BBERG HIGH YIELD BOND ETF

JNK

34.41%

25.60%

$2,192,437,042

87.50

3

INVESCO SENIOR LOAN ETF

BKLN

25.42%

20.27%

$1,215,506,317

85.00

4

XTRACKERS $ HIGH YIELD CORP BOND ETF

HYLB

19.74%

16.48%

$729,045,527

75.00

Institutionally, ETFs are primarily used as a portfolio hedging vehicles (shorts in the HYG, LQD, JNK and TLT ETFs make up 55% of total Fixed Income ETF short interest) so one can expect that in a downward trending market most of the larger ETF short positions would have large positive returns. Since the beginning of March, before the FOMC began increasing the fed funds rate and the 10-year treasury was still under 2%, Fixed Income ETF shorts are up $2.45 billion in net-of financing mark-to-market profits, a +7.46% return in less than three months.

90% of shorted ETF’s shorts (333 out of 372 Fixed Income ETFs with short interest) and 98% of every dollar shorted in Fixed Income ETFs have been profitable from March – May. The Fixed Income ETFs with the largest mark-to-market profits for the month are below.

The Most Profitable Fixed Income ETF Shorts ($): May 2022

#

Name

Ticker

Average Short Interest

Mar-May

PL $

Mar-May PL %

1

ISHS IBOXX $ HIGH YIELD CORP BOND ETF

HYG

$8,357,651,730

$674,647,595

8.07%

2

ISHS IBOXX $ INV GRD CORP BOND ETF

LQD

$5,822,194,306

$492,440,782

8.46%

3

ISHS 20+ YR TREAS BOND ETF

TLT

$2,724,677,459

$412,843,839

15.15%

4

SPDR BBERG HIGH YIELD BOND ETF

JNK

$2,401,333,460

$210,598,943

8.77%

5

ISHS 7-10 YR TREAS BOND ETF

IEF

$954,903,739

$61,402,165

6.43%

6

ISHS TIPS FUND ETF

TIP

$1,251,440,353

$60,185,307

4.81%

7

INVESCO SENIOR LOAN ETF

BKLN

$1,399,293,223

$57,959,133

4.14%

8

XTRACKERS $ HIGH YIELD CORP BOND ETF

HYLB

$634,192,243

$52,312,675

8.25%

9

ISHS CORE US AGGREGATE BOND ETF

AGG

$905,351,217

$47,006,497

5.19%

10

VNGRD LONG-TERM CORP BOND ETF

VCLT

$336,141,499

$41,905,010

12.47%

There were only three Fixed Income ETFs that had mark-to-market losses over $1 million, and each of them were leveraged inverse securities. The Fixed Income ETFs with the largest mark-to-market losses for the month are below.

The Least Profitable Fixed Income ETF Shorts ($): May 2022

#

Name

Ticker

Average Short Interest

Mar-May PL $

Mar-May PL %

1

PROSHS ULTRASHORT 2X 20+ YR TREAS ETF

TBT

$113,373,790

$(27,773,823)

-24.50%

2

DRXN DAILY 20 YR TREASURY BEAR 3X ETF

TMV

$23,960,079

$(6,828,746)

-28.50%

3

PROSHS ULTRAPRO SHORT -3X 20+ YEAR TREASURY ETF

TTT

$5,404,355

$(1,307,976)

-24.20%

4

ISHS IBONDS DEC 2028 ETF

IBDT

14,732,953

$(503,542)

-3.42%

5

PIMCO SHORT TERM MUNICIPAL BOND ETF

SMMU

$6,919,798

$(77,332)

-1.12%

6

SPDR BBERG BARCAP 1-3 MONTH TBILL ETF

BIL

$126,344,318

$(55,105)

-0.04%

7

WTREE FLOATING RATE TREASURY ETF

USFR

$32,839,464

$(36,227)

-0.11%

8

ISHS IBONDS DEC 2023 TERM TREASURY ETF

IBTD

$2,012,367

$(19,130)

-0.95%

9

ISHS TREASURY FLOATING RATE ETF

TFLO

$13,170,373

$(14,410)

-0.11%

10

ISHS SHORT TREASURY BOND ETF

SHV

$165,745,820

$(12,936)

-0.01%

The outright size of some ETF shorts can skew the results when looking at Profit & Loss in dollar terms, looking at Profit & Loss in percentage terms tells us which shorted ETFs had the largest price moves in April. Most profitable shorts in % terms with over $5 million in short interest are below.

The Most Profitable Fixed Income ETF Shorts (%): May 2022

#

Name

Ticker

Average Short Interest

Mar-May

PL $

Mar-May

PL %

1

DRXN DAILY 20 YR TREAS BULL 3X ETF

TMF

$12,357,287

$6,046,299

48.93%

2

VNGRD EXTENDED DUR TREAS ETF

EDV

$19,054,897

$3,551,857

18.64%

3

SPDR BARCAP CONVERT SECURITY ETF

CWB

$90,759,290

$15,429,856

17.00%

4

ISHS 20+ YR TREAS BOND ETF

TLT

$2,724,677,459

$412,843,839

15.15%

5

VNGRD LONGTERM TREASURY ETF

VGLT

$78,128,635

$11,768,805

15.06%

6

ISHS 10 YEAR CREDIT BOND ETF

IGLB

$44,333,032

$6,585,741

14.86%

7

PIMCO 25+ YR ZERO COUPON US TREAS ETF

ZROZ

$7,353,414

$1,039,221

14.13%

8

SPDR PORTFOLIO LONG TERM TREAS ETF

SPTL

$173,556,773

$24,089,491

13.88%

9

INVESCO VARIABLE RATE PREFERRED ETF

VRP

$6,615,851

$830,008

12.55%

10

VNGRD LONG-TERM CORP BOND ETF

VCLT

$336,141,499

$41,905,010

12.47%

The least profitable Fixed Income ETF shorts in % terms with over $5 million in short interest are below.

The Least Profitable Fixed Income ETF Shorts (%): May 2022

#

Name

Ticker

Average Short Interest

Mar-May

PL $

Mar-May PL %

1

DRXN DAILY 20 YR TREASURY BEAR 3X ETF

TMV

$23,960,079

$(6,828,746)

-28.50%

2

PROSHS ULTRA 2X 20+ YR TREAS ETF

TBT

$113,373,790

$(27,773,823)

-24.50%

3

PROSHS ULTRA SHORT -3X 20+ YR TREAS ETF

TTT

$5,404,355

$(1,307,976)

-24.20%

4

ISHS IBONDS DEC 2028 ETF

IBDT

$14,732,953

$(503,542)

-3.42%

5

PIMCO SHORT TERM MUNICIPAL BOND ETF

SMMU

$6,919,798

$(77,332)

-1.12%

6

ISHS IBONDS DEC 2023 TERM TREASURY ETF

IBTD

$2,012,367

$(19,130)

-0.95%

7

SPDR BBERG 3-12 MONTH T-BILL ETF

BILS

$1,664,354

$(2,159)

-0.13%

8

WTREE FLOATING RATE TREASURY ETF

USFR

$32,839,464

$(36,227)

-0.11%

9

ISHS TREASURY FLOATING RATE ETF

TFLO

$13,170,373

$(14,410)

-0.11%

10

CLEARSHARES ULTRA-SHORT MATU

OPER

$4,605,320

$(3,388)

-0.07%

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