Betting on Crisis, Hedge Funds Short Italian Bonds

From 2010 to 2012, a parade of investors, deeply skeptical about the eurozone’s ability to hold together, wagered that the bonds of debt-plagued countries like Greece, Ireland, Italy and Spain would keep falling. It became a self-fulfilling prophecy as pension funds, mutual funds and banks sold these suddenly risky securities.

The Continentwide fire sale was halted only when Mario Draghi, the president of the European Central Bank, put in place an aggressive program to buy the bonds, which made their prices soar and their interest rates fall.

Now, as the E.C.B.’s bond-purchasing program draws to a close, the same strains that prompted the earlier bout of selling — weaker countries running up potentially unsustainable debts — are showing again.

In Italy, for example, the new government is promising an aggressive spending program to spur the country’s stagnant economy. The populists are not deterred by the fiscal restraints imposed on eurozone countries by Brussels.

“These people feel very strongly that deficit limits make no sense,” said Jens Nordvig, the founder of Exante Data, a financial research firm that provides trading ideas to hedge funds.

Many large investors, he said, now “have a short bias” toward Italy, situs judi online believing that a clash between Rome and Brussels over eurozone rules and regulations could lead to a sell-off. If Italy flouts European deficit restrictions, for example, investors and large banks are likely to sell the government’s bonds, fearing deep losses.

Nordvig said that a robust market for futures contracts tied to Italian government bonds had made it easy to bet against Italy. Futures contracts oblige an investor to buy or sell an asset at a specified date in the future. The popularity of the futures market in Italian bonds means it is simpler and cheaper than before to place speculative bets about coming price swings.

Sponsors on Thursday also removed a provision that would have blocked any facility in New Jersey from opening a sports book if its owners had a 10 percent stake or greater in a professional sports team. That would have affected the Golden Nugget in Atlantic City, which is owned by Tilman Fertitta, who also owns the Houston Rockets of the NBA.

Now, that casino would be barred only from accepting bets on NBA games.

Tom Pohlman, the Golden Nugget’s general manager, said “we are grateful” to lawmakers for “listening to our concerns,” but “we hope to persuade the lawmakers over time that the total NBA ban is unnecessary and should be limited simply to the Houston Rockets.”

Assemblyman Ralph Caputo, D-Essex, said passing the bill is “a big deal” because sports betting will not only generate tax revenue but generate thousands of jobs in the state and more business to hotels and restaurants.

Former state Sen. Raymond Lesniak — the Union County Democrat who spent years leading the fight for sports betting here — returned to the Statehouse to see the measure pass.

“I’m speechless,” said a smiling Lesniak, who retired from the Senate in January.

NJ Advance Media staff writers Matt Arco and Samantha Marcus contributed to this report.

Brent Johnson may be reached at bjohnsonnjadvancemediam. johnsb01. Find NJm Politics on .


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