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ProShares Short High Yield (NYSEARCA:SJB - Get Free Report) saw a large increase in short interest in March. As of March 13th, there was short interest totaling 985,931 shares, an increase of 2,391.4% from the February 26th total of 39,573 shares. Currently, 34.6% of the company's shares are sold short. Based on an average daily
ProShares Short High Yield ETF provides inverse exposure to the Markit iBoxx® $ Liquid High Yield Index for hedgers, speculators, and underwriters. Fundamentally, we see option-adjusted spreads widening. A factor model quantifies our thematic argument. Interest coverage ratios bottomed earlier this year but a loss in global confidence could see ratios trend down again.
ProShares Short High Yield ETF is an inverse fund. The vehicle seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the Markit iBoxx Liquid High Yield Index.
In my opinion, there are three reasons to hold a short position in high-yield debt. Interest rates are likely to continue to rise.
SJB shorts high yield corporate bonds. The fund has been a winner this year amid rising rates.
Junk bond exchange traded funds have taken a beating this year, and the blows may not let up any time soon. Year-to-date, the iShares iBoxx $ High Yield Corp Bond ETF (NYSEArca: HYG) declined 10.4% and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) decreased 10.9%.
These ETFs could be useful if interest rates continue to increase.
Fixed-income traders are becoming increasingly bearish on the speculative-grade, high-yield debt market. Exchange traded fund investors can also hedge against further weakness in the junk bond segment through an alternative strategy.