Hedge Fund Spain Credit Default Swaps
Hedge Funds Look for Relative Value Trades in Spain
Hedge funds have spotted money-making opportunities in Spain, betting that market fears over the southern European country's deepening debt crisis have made some assets too cheap relative to other securities.
Managers have been exploiting what they see as the mispricing of credit default swaps (CDS), government and corporate bonds and stocks, after months of growing market concern that Spain might need an international bailout, using relative value trades - betting on one security versus another.
"There's probably more juice for relative value trades than directional plays," said one fund of funds manager who spoke on condition of anonymity. "It's a pretty well-flagged story. I don't know how much juice they think is in it," the fund manager said of Spanish CDS bets.
The moves echo the earlier stages of the euro zone crisis, when hedge funds - renowned as being among the nimblest of investors - bought CDS - designed to pay out in the event of default - on Greece and other weaker euro zone countries.Source