XLB enters the first full week of June with its borrow market still under pressure — but the dynamics have shifted slightly from yesterday's convergence alarm.
Short interest has edged higher again. It climbed to 22.3% of free float as of June 2, adding another 1.4% on the day and extending a weekly gain of 17.4%. That puts the current short position at roughly 12.8 million shares — down from the late-April peak near 18.2 million, but firmly back on an upward trajectory after the mid-May trough around 10.9 million. Shorts rebuilt quickly and have not backed off.
Availability has loosened marginally from Tuesday's squeeze. It recovered to 14.1% on June 2, up from the alarming 9.7% reading on June 1 — though still well inside tight territory. For context, availability was sitting at 188% as recently as May 27. The borrow pool hasn't reopened; it has simply stopped contracting at the same pace. The 52-week low remains 3.85%, and the current level is still closer to that floor than to anything resembling normal supply. Cost to borrow has moved with it — rising 42% over the past month to 0.79% annualised. That remains low in absolute terms, but the trend is unambiguous: the lending desk is still repricing upward.
Options positioning tells a calmer story than the lending data. The put/call ratio is running at 0.68, almost exactly in line with its 20-day average of 0.68. The z-score is effectively flat at 0.12. There is no surge in hedging demand from the options market — which creates an interesting split. Shorts are adding to positions and borrow supply is thin, but derivatives traders are not positioning for an imminent leg lower with any urgency.
The ORTEX short score of 61.3 has been broadly stable over the past two weeks, oscillating in a tight band between 59 and 62. The score jumped sharply on May 27 — from 54.7 to 58.4 in a single session — and has held near the higher range since. That step-change coincided with the availability collapse from 188% to sub-20% territory, a borrow-market event that the score has now priced in. Institutional flows from the most recent filings show BNP Paribas adding nearly 4.7 million shares and Wells Fargo adding 2.9 million — both sizeable builds into a fund where the borrow is getting harder to source. Citadel and Marshall Wace both initiated or materially increased positions in the quarter to March 31, adding further complexity to the picture.
The key variable to watch is whether availability continues recovering toward the 20–30% range seen in late May, or reverts toward the sub-10% levels that briefly appeared on June 1. If short interest keeps building while the borrow pool stays this constrained, the cost to borrow becomes the next pressure point.
See the live data behind this article on ORTEX.
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