Rome’s Financial Volatility to Shock the Eurozone — Hedge Funds Bet $39 Billion Against Italian Debt

Bitcoin News

Hedge funds are betting against Rome’s liabilities as S&P Market Intelligence data indicates investors have amassed a $37 billion short bet against Italian debt. The hedge funds are betting large against Italian bonds and investors haven’t bet this high against Rome since 2008, as Italy faces political uncertainty, an energy crisis, and an inflation rate of 8.4% in July.

Investors Expect Italian Debt Default Amid Country’s Shaky Bond Market, Energy Crisis

Italy’s economy has been volatile in recent times as the Ukraine-Russia war has wreaked havoc on the European country adjacent to the Mediterranean coastline. The country is dealing with a significant energy crisis and Italian residents are being asked to turn down the heat this winter. The Italian economy has people speculating that it’s only going to get worse and reports show a massive number of investors are shorting Rome’s liabilities.

Bond borrowing schemes highlight how investors borrow the Italian liabilities in order to bet that values will decline before the debt buyback is due. S&P Market Intelligence data shows €37.20 billion of Italian bonds were borrowed by August 23. The sum of bonds borrowed is the highest since January 2008 during the Great Recession. Italy has continued to print high inflation rates as well, with May posting 7.3%, June recording 8.5%, and July printing 8.4%.

The $37 billion in shorts suggests market speculators believe Rome will default and the financial shock will spread like a contagion across Europe. Italy is traditionally known for having a strong economy but the country has a dependence on Russian gas. The International Monetary Fund (IMF) warned last month that Italy’s economy would see a 5% contraction due to Europe’s tensions with Russia over the Ukraine-Russia war. Italy’s economic downturn is taking place amid India surpassing the U.K. as the world’s fifth largest economy.

Reports noted in July that Italy and the country’s prime minister, Mario Draghi, have not done enough “to kick-start growth.” Despite Draghi’s pledge to save the euro in July 2012, Italy is struggling and the country pays the highest premium to borrow bonds after Greece. Holger Schmieding, an economist at Berenberg, said: “Draghi is trying, has done a little bit here and there but neither I nor the market are yet convinced that trend growth in Italy is strong enough.”

Tags in this story
bond market, bond market crash, bond scheme, bonds, debt default, economics, Economy, Energy crisis, Europe, Eurozone, Gas, Germany, Greece, India, inflation, Italy, market speculators, Mediterranean coastline, premium, Rome, Russia, uk, Ukraine-Russia war

What do you think about the hedge funds betting against Italy’s debt? Let us know what you think about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,700 articles for Bitcoin.com News about the disruptive protocols emerging today.




Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Read disclaimer

Articles You May Like

Robinhood and Circle Partner to Let Exchange and Wallet Users Utilize the Stablecoin USDC
Reversible transactions could mitigate crypto theft — Researchers
Circle Launches Cross-Chain Transfer Protocol, USDC Issuer Acquires Payment Orchestration Firm Elements
Bitcoin profitability for long-term holders decline to 4-year low: Data
Arthur Hayes Questions PoS Ethereum’s Decentralization, Suggests Rising Price