Short sellers just paid nearly $42 million to bet against two BlackRock bond ETFs. That's with credit spreads - the gap between what companies pay to borrow and what the U.S. government pays - near the tightest levels of the year and stocks at record highs.
That backdrop should make shorting bonds a quiet trade. Right now, it's the loudest one in the ETF market.
The two funds in question are LQD and HYG. LQD holds investment-grade corporate bonds - debt from companies with strong credit.
HYG holds high-yield bonds - debt from riskier companies that pay a bigger interest rate to make up for the risk. Both funds are run by BlackRock, and both rank among the largest of their kind on Wall Street.
When an investor wants to short an ETF - meaning bet that its price will fall - they have to borrow shares from another investor who already owns them. The owner gets paid a fee for the loan.
New data from EquiLend, which tracks the actual lending of ETF shares to short sellers, shows LQD and HYG are the top two earning funds in the entire ETF market this year.
LQD has pulled in $22.3 million in lending fees, with HYG close behind at $19.6 million.
That fee revenue is a clean proxy for short demand, and demand on those two funds is higher than on any other ETF in the country.
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It's not just BlackRock's bond funds drawing the attention.
Total ETF lending revenue is running 53% ahead of the same stretch in 2025, with the average borrow fee now sitting at 83 basis points - just under 1% of borrowed share value, and the highest reading in any full year going back to 2021.
The top ten earning ETFs are dominated by fixed-income funds: corporate credit, senior loans, even muni bonds.
The borrow desk is busy - lenders are charging more, and the demand is piling into bond ETFs rather than stocks.
Famed short-seller Carson Block flagged the same two BlackRock funds earlier this spring, and he's bearish on both.
The consensus on credit right now is some version of "complacency" - spreads are tight, defaults are low, and the assumption is that nothing breaks. The data from EquiLend says somebody is paying real money to bet against that view.
Tight spreads and record stocks make shorting bonds an unpopular trade. The most expensive ETFs in the country to borrow against say someone's doing it anyway.
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