Due to liquidity, ease of access and often low borrowing fees, among other reasons, professional traders looking to establish bearish positions or hedge long positions often turn to exchange-traded funds (ETFs). Usually, the most heavily shorted ETFs are the SPDR S&P 500 ETF (SPY), the PowerShares QQQ (QQQ) and the iShares Russell 2000 ETF (IWM). That is the case today, as SPY, IWM and QQQ, in that order, are the most shorted U.S.-listed ETFs. However, recent data suggest that some professional market participants are increasing bearish bets on some well-known fixed income ETFs.

For the period of Feb. 24 through March 2, six of the 10 ETFs that saw the largest increases in short interest were bond funds. Leading the way was the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB). EMB, the world's largest emerging markets bond fund of any type, saw its short interest jump $357 million to $1.40 billion for the week ended March 2, according to S3 Partners data. Year to date, investors have added $53.1 million to EMB. EMB tracks the J.P. Morgan EMBI Global Core Index, with a 30-day SEC yield of 4.77% and an effective duration of 7.33 years. (See also: Plenty of Enthusiasm for EM Bond ETFs.)

S3 data also indicate that market participants remain enthusiastic about shorting corporate bond ETFs. For example, the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) saw its short interest climb by $146 million to $3.01 billion last week. Only five ETFs have larger short interest, in dollar terms, than does LQD.

High-yield corporate bond ETFs remain favored targets of bearish traders as well. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK), the two largest junk bond ETFs, are among the 10 most shorted ETFs in the U.S. Over the past month, short interest in HYG and JNK has increased by $973 million and $790 million, respectively, according to S3. (For more, see: Should You Invest With Junk Bond ETFs?)

Data suggest that some traders may be reducing their inflation expectations, as highlighted by an uptick in short interest in a popular ETF holding Treasury Inflation Protection Securities (TIPS). The iShares TIPS Bond ETF (TIP) saw a significant percentage increase in short interest to $155 million from $99 million, according to S3 data.

Cementing the increase in bearish outlook for bond ETFs, the iShares 1-3 Year Treasury Bond ETF (SHY), iShares Core U.S. Aggregate Bond ETF (AGG) and Vanguard Short-Term Bond ETF (BSV) all saw significant increases in short interest last week, according to S3 Partners. (For additional reading, check out: How to Short the U.S. Bond Market.)