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Hedge funds shake up the euro zone’s $10 trillion government bond market
By Jerry
LONDON, March 19 (Reuters) – Hedge funds are piling into the euro zone’s $10 trillion government bond market, scenting opportunities as funding needs surge and the European Central Bank retreats.
The funds are buying a large share of government debt sales, providing a source of much-needed capital, traders and officials say. Yet the lightly-regulated investors often load their bets with bank debt, tying their fortunes to lenders, at a time when there is growing regulatory concern globally about their market impact.
Interviews with more than a dozen sources, including senior traders and treasury officials, as well as market data compiled exclusively for Reuters by electronic platform Tradeweb, show that hedge funds have become increasingly entrenched in the bloc’s debt market.
Hedge funds accounted for a record 55% of European government bond trading volume on Tradeweb last year, up from 36% in 2020, displacing other financial firms to become the dominant players for the first time.
And their reach was largest in some of Europe’s most indebted nations: hedge funds comprised two-thirds of trading volumes of Italian debt on Tradeweb, the data compiled for Reuters showed.
Tradeweb is one of the top three trading platforms for European government bonds, alongside Bloomberg and MTS, according to Coalition Greenwich, a financial services research company. The data includes euro zone countries and other European markets, including Britain.
Source: Reuter
