Shorting high-yield bonds to fund digital credit
The guest proposed a carry trade of shorting highly liquid high-yield bond ETFs to buy daily-dividend digital credit instruments.
The argument
Investors could theoretically short HYG (yielding approximately 6%) and hold SADA or STRC (yielding over 13%) during the 29-day window when HYG does not pay a dividend, capturing the yield spread before closing the short position.
The thesis, stress-tested
✓ What validates it
- ✓Market participants actively executing and reporting positive returns on this specific carry trade
- ✓SADA and STRC maintaining stable par value during the trade window
▸ Risks discussed
- ▸Price risk of HYG moving against the short position
- ▸Price and liquidity risk of SADA or STRC during the holding period
Hear it yourself
"And so I think as of today, some for us, it's around seventeen, eighteen years of bit just Bitcoin coverage relative to our annual interest obligation. And I think that's a helpful perspective when you're when you're thinking about why would somebody hold this instrument. Well, you're holding this instrument if you're holding an equity instrument for income, you're holding it for income. You're not holding it necessarily to, like, get your principal back. That is a these are hybrid instruments. These are these are like hybrid equity type debt instruments."
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