Hedge funds that made millions from the implosion of America's subprime market are betting on a similarly dramatic collapse of the euro.
Hedge funds, including Hayman Advisers and Matrix Group, have told investors that they expect the sovereign debt crisis to worsen despite the €110bn (£79bn) bail-out by the International Monetary Fund, the European Union and the European Central Bank.
Anxiety about the financial health of Europe increased yesterday after Spain’s national bank was forced to take control of CajaSur, a savings bank ridden with distressed property debt, after a rescue merger with a rival collapsed.
Traders and brokers told The Sunday Telegraph that hedge funds are using a range of financial instruments to bet that the value of the euro will fall. One trader said: “Shorting the euro is the biggest bet in town.
“We’re seeing big volumes in credit default swaps and short selling in equities that are exposed to the euro.”
Gennaro Pucci, manager at Matrix, which manages £3bn, generated 19pc returns last month in its €110m Global Credit Fund on bearish euro bets. Mr Pucci told Bloomberg: “The ECB is buying debt at artificial levels, but that won’t solve structural problems.”
Nick Swenson, manager of US-based Groveland, who made millions of pounds during the credit crisis, said he started buying credit-default swaps on Spanish, Italian and Irish government bonds in March.
Kyle Bass at Hayman, who made $500m in 2007 betting on the implosion of subprime mortgages, told investors: “The EU and the IMF went all-in with a bad hand in the highest stakes game of financial poker ever played with the world.”
There is evidence that bets against the euro are being placed by important investors around the world, which last week took the euro to four-year lows on fears Greece, Spain and Portugal may be forced to leave the single currency.
In Tokyo, the powerful Kokusai Asset Management has reportedly sold down euro assets in its $60bn (£41bn) Global Sovereign Open fund in favour of safer investments. The fund, which had been the biggest investor in Greek bonds in 2009, sold its entire holding in the troubled asset class in December.
According to the latest data from America’s Commodity Futures Trading Commission, there were over 100,000 more contracts from traders betting that the euro would fall rather than it would rise.
Two weeks ago, the number of contracts placed by speculators expecting the euro to fall in value hit a record high of 113,890.
Last week, Angela Merkel, the German Chancellor, tried to ward off speculators by banning so-called “naked” short selling of some bonds and derivatives. But traders warned the move had only served to panic the markets and the euro was likely to be a target for bearish bets again this week.
On Friday, European finance ministers agreed a strategy to overhaul the EU’s single currency rules, committing themselves to implement greater budgetary discipline by strengthening the euro’s Stability and Growth Pact.
Meeting with Mrs Merkel, David Cameron reiterated that Britain had no plans to join the euro and had the right to veto any treaty.
No comments:
Post a Comment