The rise in shorts comes as a gauge of complacency reaches the highest level since 2021, the amount of distressed debt falls to the lowest this year and US economic growth continues to confound sceptics. But expectations that incoming President Donald Trump’s policies on tariffs and immigration will boost inflation worry economists, leading some fund overseers to hedge their bets.
Asset managers with money to spend and few new deals to buy have pushed credit spreads to near all-time tights as the global economy remains strong. That’s a signal for some that it’s time to buy downside protection.
Corporate bond shorts have risen 25% to almost US$336 billion ($452.46 billion) in the past year compared with a rise of 10.6% in institutional longs to US$4.6 trillion, according to data compiled by S&P Global Market Intelligence. Wagers that prices will fall now stand at the equivalent of 7.3% of longs, up from 6.4% a year ago, based on securities borrowing.
