I believe a good portion of the recent strong rise in shorting...

I believe a good portion of the recent strong rise in shorting in the 2nd half of Jan to be related to this facility. Shorts rose from around 15m to 27m shares sold short 'shortly' thereafter.

http://www.asx.com.au/asxpdf/20130123/pdf/42ckpmcmygd448.pdf

BND is affected by large short interests in the same way other heavily shorted stocks are affected. It is in the interests of those short to achive the lowest possible price prior to closing and the closing is done on high volume at the very bottom exactly the same was as selling is done on very high volume right at the top. Until then, the price is kept under constant selling pressure by small parcel sell algo to get the position to the most profitable point and force as many margin calls as possible. Anything that cannot be covered on market is crossed with an existing controlled line of stock, and this is precisely why super contributions were lobbied for for so long by the finance industry: It gives them a slush fund of OPM shares that can be used in situations like this as long as the industry standard 4% return can be offered in the long run.

But of course if a party knows of a definitive negative outcome not yet known by the market will definitely eventuate, say a political directive has been given to a bureaucrat in the mining industry (as we have seen elsewhere recently) all the prescient shorter needs to di is bide their time until the bureaucrat has gone through the motions and the pre-determined political decision is suddenly arrived at.

As to what exaclty the play is here by the shorters, I dont know, but I have been around long enough to know one thing - they never get themselves in a hole. They have NO RISK of loss or they would not have gone so hard. Over 5% of the issue short which is way over all the volume traded in an average month. Insane, unless you know you will be able to cover 'fortuitously' at these prices or below on high volume. Even the recent rise to 15c didnt see them blink; they simply loaded up more shorts. They are VERY confident of lower prices.