A big short growing in Italian debt
Abhinav Ramnarayan, Saikat Chatterjee, 09 November 2018
LONDON (Reuters) – A surge of interest in Italian bond futures may be a sign of a substantial short position building up in the derivatives market as tensions rise over budget negotiations between Rome and Brussels.
The big short in the futures market reflects a buildup in speculative and hedging activity after a tumultuous summer in the Italian markets and also indicates rising concerns of capital outflows.
Investors say it also leaves the market potentially open to a sharp rebound if the debt story improves in some way over the coming months either through a breakthrough in negotiations over the debt dynamics or approval from credit rating agencies.
As Italy’s anti-establishment government attempts to pass an expansionary budget in the face of opposition from the European Union, investors are ramping up their use of a product that is increasingly being used to take bets that more losses are in store for the country’s bonds.
