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Illustration: Sarah Grillo/Axios

In the post-GameStop world, shorting equities is still too risky for many hedge fund managers.

Why it matters: With the equity market too buoyant to bet against, investors have turned to the high-yield bond market for shorts, with a view that prices there are also inflated.

Details: About $55 billion of global high-yield bonds have been sold short, up from $35 billion at the beginning of the year, Bloomberg reports. That's the biggest short position in high-yield since 2008.

  • “The scary part of that trade is that it’s expensive to short cash bonds,” a hedge fund manager tells Axios.
  • To short a bond, the investor has to pay to borrow it — as well as pay the semi-annual coupon payments as they come due.
  • The upside is also limited since bonds are unlikely to plummet dramatically over a short time, unless they are tied to distressed companies (and often not even then).

Be smart: Shorting high-yield is more frequently a view on the market overall.

  • High-yield bonds are at toppy valuations. The ICE BofA high-yield index now yields 4.2%, and it's sat at record lows in the low-4% area since February.
  • Investors shorting high-yield are positioning themselves for a potential scaling back of central bank support, Bloomberg says.

Meanwhile, in the equity market, the median short interest in S&P 500 companies is near a 17-year low.

Go deeper

Southwest heat wave intensifies, breaks records and worsens drought

A temperature "misery index" shows peak levels across the Southwest (orange and yellow), and the upper air flow shows how the jet stream is being pushed north, away from the heat dome parked over the Four Corners region. (Earth.nullschool.net)

A punishing and long-enduring heat wave is intensifying in parts of the West and Southwest, with heat warnings and advisories in effect across seven states Wednesday. The heat will not relent until late in the weekend.

Threat level: In the coming days, 40 million are likely to see temperatures reach or exceed 100 degrees.

Updated 42 mins ago - World

Putin calls Biden summit "constructive," but blames U.S. for tensions

Photo: Sergei Bobylev\TASS via Getty Images

Russian President Vladimir Putin said Wednesday that his summit with President Biden was "constructive," and that the countries had agreed their ambassadors would imminently return to their posts in Moscow and Washington.

What he's saying: "Many of our joint positions are divergent but nevertheless I think both sides manifested a determination to try and understand each other and try and converge our positions," Putin told reporters at a press conference following the meetings, according to a translator.

Updated 1 hour ago - World

Live updates: Putin concludes press conference, Biden up next

President Biden met with Russian President Vladimir Putin in Geneva for less than four hours of talks on Wednesday, a highly anticipated summit that comes as both sides say U.S.-Russia relations have sunk to a new post-Cold War low.

The latest: At a press conference following the conclusion of the summit, Putin called the talks "very constructive' and announced that the U.S. and Russia's respective ambassadors would return to their posts.