For the most part, short sellers did not see the recent bank failures coming.

At the end of February, short interest in financials stocks sold on all major US exchanges was at 1.41%, the lowest of any sector and 9 basis points lower than it was at the end of 2022, according to the latest S&P Global Market Intelligence data.

By comparison, short interest in consumer discretionary stocks was at 5.67% at the end of February. Consumer discretionary remains the most-shorted sector as sellers continue to bet that persistently high inflation will lessen demand.

Short interest, which measures the percentage of outstanding shares held by short sellers, rose for nearly all sectors as sellers bet that the most aggressive Federal Reserve rate hike in history would trigger a recession. Still, short interest in financials has remained essentially flat for months.

Short interest in the S&P 500 was at 2.26% at the end of February, 85 basis points higher than short interest in financials. The S&P 500 declined by 13.1% from Feb. 1 to March 20, while S&P 500 financials stocks declined 21.2% over that same stretch.

While short interest in some of the banks hardest hit by the crisis was above average, it remained well below some of the most shorted companies and saw declines from the previous month.

For example, SVB Financial Group, the parent company of the failed Silicon Valley Bank, had short interest of 5.41% at the end of February, down from 6.88% as of mid-January, according to the data. Signature Bank, the failed lender, had 6.08% short interest at the end of February, down from 6.37% as of mid-January.

Short sellers did increase their bets against cryptocurrency-focused Silvergate Capital Corp., which had short interest of about 66.8% at the end of February, up from about 63.9% at the end of January.

Silvergate was the second-most-shorted stock at the end of February, behind only Bed Bath & Beyond Inc., which had 70.4% short interest.