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Hedge funds take bets against core euro zone bonds | Reuters

Hedge funds are piling into bets against the bonds of core euro zone countries like Germany and France, signaling a growing fear that nations once considered safe havens could be dragged down by the crisis in peripheral states like Greece and Spain.

After a buoyant first quarter for markets, when fears over the euro zone debt crisis receded thanks to a 1-trillion-euro ($1.3 trillion) cash boost from the European Central Bank, hedge funds have been quick to make sure they don’t miss out as concerns over the future of the single currency resurface.

Rather than bet on the likes of Greece and Spain, whose problems are now well documented, funds are shorting the bonds of core countries as a so-called ‘tail hedge’ – the purchase of protection against extreme events such as the launch of eurobonds, which would drive up the cost of borrowing for Germany, or even a break up of the currency bloc.

via Hedge funds take bets against core euro zone bonds | Reuters.

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