Struggling Euro Zone Nations Increasingly Forced To Turn To Hedge Funds For Debt Funding
With pensions around the world increasingly reallocated funds to equity markets in a desparate effort to close funding gaps amid recklessly low central banking rates, and traditional banks tapped out by regulatory restrictions on their balance sheets, struggling Euro Zone countries are increasingly being forced to turn to hedge funds to fill their debt issuances. As Reuters points out, struggling nations like Spain, Italy, Belgium and France have seen a 3x increase in debt issuance allocations to hedge funds.
With banks playing a less active part in the sovereign debt market because of pressures on their balance sheets, several countries have turned to hedge funds to sell their targeted amount of bonds, according to data, officials and bankers.
Spain, Italy, Belgium and France have sought to lock in record-low borrowing rates this year with 50-year bond issues for 3-5 billion euros ($3.2-$5.3 billion). Each of them reported a historically high allocation of 13-17 percent to hedge funds.
By contrast, just three years ago, Spain, Italy and Belgium were selling only 4-7 percent of their syndicated bond sales to that community of investors, according to data from IFR, a Thomson Reuters company. There is no comparable data for France, which does not routinely record hedge funds’ allocation.
“Hedge funds have grown in importance,” said Damien Carde, head of public-sector syndication for RBS, which handles bond issues for several euro zone countries. “If you need to bring a large syndication to the market it is always a plus to have that community on board.”
This post was published at Zero Hedge on Nov 22, 2016.