Demand for protection against declines has pushed the number of outstanding puts on the iShares iBoxx $ High Yield Corporate Bond exchange-traded fund to five for each call, up from a ratio of 1.6 at the start of 2014, data compiled by Bloomberg show. The eight contracts on the fund with the highest ownership are all bearish.
Investors are turning skeptical on the five-year bull market in speculative debt amid concern the gains have gone on too long and that violence in the Middle East and Ukraine will boost demand for safer assets. Speculation that the Federal Reserve will raise interest rates within the next year is also supporting demand for put options, often used as a hedge because their value rises when the ETF (HYG) falls.
?Sometimes when an asset class gets to be expensive, you don?t need a catalyst,? Alan Higgins, who helps oversee about $48 billion as U.K. chief investment officer at Coutts & Co. in London, said by phone. ?It?s simply that the value is not there.?
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