Btp, the Hedge attack: "The biggest bet against the Italian debt"

Btp, the Hedge attack: “The biggest bet against the Italian debt”

Hedge funds are the biggest bet against Italy’s debt since the global financial crisis due to growing political concerns in Rome and the country’s dependence on Russian gas imports. According to data from S&P Global Market Intelligence, cited from the website of the Financial Times, the total value of Italian bonds that investors borrowed to bet on falling prices for Italian government bonds reached their highest level since January 2008 this month, at over € 39 billion. Just in 2008, the differential between the BTP and the Bund had touched 530 basis points. At that time the Italian government was Silvio Berlusconi. The rush of investors and speculators – able to move huge resources in a short time and condition the markets – to bet against Italy comes as the country faces economic headwinds – especially due to the increase in natural gas prices in Europe. due to Russian supply cuts – and a difficult political climate with elections approaching September.

The most exposed country is the spread race

Italy is the country most exposed in terms of what happens to gas prices, politics is a challenge, said Mark Dowding, chief investment officer of BlueBay Asset Management, which has around 106 billion in assets. In July 2022, the International Monetary Fund warned that the Russian gas ban would lead to a economic contraction of more than 5% in Italy and in three other countries, if other states had not shared their supplies. Investors also consider Italy among the countries most vulnerable to the decision of the European Central Bank to abolish economic stimulus programs by raising interest rates and blocking bond purchases that have supported the country’s massive debt market. This will most likely involve a higher cost for the Italian state to finance itself on the international debt markets.

Outflows in the second quarter

The specter of 2008 well present in the heads of investors, this 2022 was not a golden period for the performance of hedges, which were hit by several outflows in the second quarter, yet Draghi’s resignation has brought back great appeal on short strategies. our debt, comments al Courier Peter Cal of Copernicus Sim. And he adds: Hedges are always ready to exploit investor fears. Despite Draghi was reassuring yesterday in Rimini, reiterating that Italy will succeed. The sentiment on the Italian mkt remains difficult, the MIB remains anchored below 23 thousand points and even the weakness of the euro does not seem to give breath to our exports. The big hedge bet could have an impact on the spread but Italy still has some tools capable of calming the waters one above all the enormous private savings of families.


The spread, or the yield differential between the Italian ten-year BTP and the German Bund of equal duration, in recent weeks has approached the 230 basis points threshold several times (here the trend of the spread in real time). Which is to say that the Italian government has to pay around 2% more than Germany to finance itself on the debt markets. This morning the session on the government bond market opens with the spread at 226.4 points, with the Italian ten-year yield at 3.62%. If we think that our spread far exceeds the Portuguese one, we understand the current paradox that hedges are trying to exploitconcludes Cal.

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