• ​Short interest in LQD and HYG, the benchmark investment-grade and high-yield corporate bond ETFs, rose sharply this year: LQD from 17% to 28% of float, and HYG from 26% to 61%.  

• ​The builds came in two bursts, March and September, each after a sharp Treasury selloff. By early October, the 10-year Treasury yield was at its highest level since 2002. 

• ​In January and March, shorts rotated out of TLT and into credit. In September they did not: TLT and credit shorts rose together.​ 

• ​The ETFs. LQD holds investment grade corporate bonds. HYG and JNK hold high yield corporate bonds. TLT holds US Treasuries maturing in more than 20 years. Short interest is shown as a percentage of float, the ETF shares available to trade, except in the first chart. 

• ​Shorts Rotate from TLT in January and March, but not in September. 

• In January, TLT shorts fell $1.2 billion as LQD and HYG shorts rose $3.6 billion. In March, TLT shorts fell $2.8 billion as LQD and HYG shorts rose $3.7 billion. In September, both rose: shorts added to credit without leaving Treasuries.

• Credit short interest swings from month to month, but the two largest jumps came in March and September. Net of every other month this year, LQD short interest fell 18 percentage points of float. HYG's rose 16 points, mostly in January and February, so HYG has the steadier build.

• On the long side, active managers raised their LQD holdings from 31% to 40% of float in May, then trimmed to 37% by September. HYG and JNK active long interest barely changed this year.

• March's rotation came as the Iran conflict pushed oil and yields higher, and stocks and Treasuries fell together: the S&P 500 lost 4.9%. The build unwound in April as stocks rebounded 11%. September's build came on Fed rate expectations with stocks flat, and LQD shorts have since eased to 28% of float.

• LQD short interest rose in each of 2026’s three sharpest TLT declines, and most in the largest. The September selloff took the 10-year yield to 5.34% on October 1, its highest since 2002, and TLT to its year-to-date low on October 5.

• The pattern is new: in the two 2025 selloffs, LQD shorts fell or barely moved. Heavy issuance may have added to March's build, the year's busiest month for corporate bonds. But issuance does not track LQD shorts month to month, and LQD shorts fell in February, the second busiest month.

• Things to watch: LQD short interest in November. A fall back toward its pre-September level of about 16% of float would make September a repeat of March.

• Treasury yields and CDX. Each sharp rise in yields this year brought an LQD build. CDX IG closed at 62 on October 19, near its one-year high of 67.

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