Why David Einhorn Is Betting Against Corporate Debt

David Einhorn, a hedge fund manager, is betting against US corporate debt due to deteriorating protections for creditors. He criticizes rating agencies for being complacent and allowing debt ratios to worsen without downgrading credit ratings. Einhorn believes that if downgrades occur, perceived credit risk will rise, potentially yielding positive returns on short positions. He also uses this strategy as a hedge against long equity positions. The low cost of insuring against credit losses is attributed to the global rise in negative yielding debt, with the ECB signaling further rate cuts and asset purchases. This environment forces investors into riskier debt without recognizing inherent risks.

How does Einhorn use his short position as a hedge?

What factors have contributed to the rise of negative yielding debt globally?