Hedge Funds France
Hedge Funds Train Their Sights on FranceMost investors have been overly generous in their assessment of France's fiscal situation, hedge funds suggest. Recently, hedge funds have been targeting what they see as another indebted Euro Zone country that could see its borrowing costs shoot upward. Hedge funds believe that the low interest rates that France can borrow at are unsustainable and are taking positions to benefit if and when the market turns against the country.
Investors have generally given France the benefit of the doubt this year, treating it as a core euro zone economy despite its debt. Its bond yields have, as a result, generally tracked Germany's rather than struggling Italy's or Spain's.
But many macro funds now think the yields, which have collapsed this year, cannot remain around the lowest levels seen for more than 20 years. France's economy, after all, is teetering on the brink of recession.
The funds, which are often at the leading edge when it comes to future market moves, are also sceptical about the policies of French President Francois Hollande, who was elected in May.
These include raising taxes on the rich and cutting the pension age to 60 for some workers, risking a reduction in tax revenues, increasing pressure on France's welfare system and hitting its credit rating.
"The market seems to be looking at France as a safe haven, yet we very much believe that French yields should be converging towards Italian and Spanish yields rather than to those pertaining to Germany," said Pedro de Noronha, managing partner at London-based Noster Capital. Source