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Aug 29, 2016

S3 BLACKLIGHT: HYG ETF Short Interest Tops $5 Billion

There are over 300 Fixed Income ETF’s, of which there are only thirteen with market caps over $10 billion. But there is only one Fixed Income ETF with short interest over $5 billion – the Ishares iBoxx $ High Yield Corporate Bond ETF (HYG US), which just climbed over $5.1 billion in short interest today.

The HYG ETF has been a very active short for the last several years averaging $2.6 billion in 2014 and $2.1 billion in 2015. HYG short interest broke through the $3 billion level for only the third time historically in May of this year and never looked back. The last two times HYG short interest was over $3 billion were also in May - May 2015 and March-May 2014.

Short sellers continued to build their positions during the summer and reached $3.3 billion, up 53% year to date, by the end of July. August saw an acceleration in short selling, with almost $1.8 billion of new short activity in the month. Short interest has grown to $5.1 billion, up 134% for the year and 51% since the 2nd quarter.

Short sellers were not the only traders with a negative outlook on HYG, long holders were also pessimistic on the ETF in the 3rd quarter with over $750 million of net outflows in the ETF.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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