Credit Is So Hot That Traders Are Building Shorts
- Spreads are near all time tights, making hedging attractive
- Credit market complacency is at highest level since 2021
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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 $336 billion in the past year compared with a rise of 10.6% in institutional longs to $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.