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Oct 18, 2017

S3 Analytics: ETF News Flash

S3 Partners tracks the daily short interest and daily stock loan financing rates for 1,175 active ETF’s with $140 billion of notional value. The following are some of the highlights we’ve gleaned from our ETF dataset.

Short activity in the iShs iBoxx $ High Yield Corp Bond ETF (HYG) is up $194 million today, bringing total short interest to $4.1 billion as investors continue to fear an uptick in inflation will speed up the Fed’s tightening policy and increase the probability of Fed Funds rate increases in 2017.

While investors were increasing their high yield corporate bond exposure, they were closing down part of their short exposure in higher grade corporate bonds. Short interest in the iShs iBoxx $ Investment Grade Corporate Bond ETF (LQD) decreased by $64 million, dropping total short interest to $980 million. This is the first time short exposure in the LQD ETF has fallen below the $1 billion level since August of this year.

The Spider Healthcare ETF (XLV) had $49 million of new short activity yesterday, bringing total short interest to $1.7 billion, as fear of added pharmaceutical regulations, repeal of ACA insurance subsidies and the possibility of the U.S. pulling out of NAFTA is adding to negative sentiment in the sector.

Even as the most 10 most shorted Banks, Investment Banks and Brokerages were up on a net basis yesterday, even with Goldman down  2.6%, short interest in the Financial Select Spider ETF (XLF) increased by $54 million, bringing total short interest to $1.85 billion.

Short interest in the VanEck Vectors Gold Miners ETF (GDX) is continuing its October decline, with $397 million of short covering today. Short interest is now down $579 million in October, bringing total short interest to $612 million. GDX short interest had been as high as $2.2 billion in late August, but shorts have been covering and realizing their short term profits or cutting their year long losses as the price of gold slid 5% since early September. 

Some short sellers may be seeing a temporary floor to the VIX’s year long slide, as short interest in the iPath S&P 500 VIX Short-term Futures ETN (VXX) has declined by $90 million, or 10%, in October. Or they might just be realizing some of the $105 million of mark-to-market profits they have earned as the VXX ETF price fell 12% in October.

Want deeper insight into the above analysis? Contact:
Managing Director Predictive Analytics, S3 Partners, LLC
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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