Hedge funds that trade bonds and loans are increasing bets that Europe’s sovereign-debt crisis will spread to Portugal, Spain and Italy, according to Bloomberg’s merry men even after Greece won a temporary reprieve with 12 billion euros in aid.
Simon Finch, head of credit trading at CQS UK LLP, a London-based hedge fund that oversees $11 billion, has bought and sold corporate bonds and loans for 18 years, has stepped up trading in mobile-phone, utility and toll-road companies in the three countries. He expects their governments will be forced to slash spending to pay off lenders, slowing growth and reducing discretionary consumer outlays. CQS is among the hedge funds that say investors are underestimating the odds of distress or even default not only by Portugal, whose credit rating was downgraded this week to junk status by Moody’s, but also by the bigger Italy and Spain.
“We are on the verge of an economic collapse which starts, let’s say, in Greece, but it could easily spread,” billionaire investor George Soros said during a panel discussion in Vienna on June 26. “The financial system remains extremely vulnerable…..”
Find out the rest at http://www.bloomberg.com/news/2011-07-07/hedge-funds-move-past-greece-with-bets-that-sovereign-debt-crisis-expands.html
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