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Thursday, July 7, 2011

Hedge Funds Bet on WIDER European DEBT CRISIS

Hedge Funds Bet on WIDER European DEBT CRISIS

"Nick Swenson, who runs Groveland Capital LLC in Minneapolis, has been wagering on sovereign defaults in peripheral European countries since March 2010. He’s not concentrating on Portugal or Ireland. Instead his $10 million fund is buying credit-default swaps on Spanish and Italian government bonds, which are cheaper than those other countries and whose defaults would potentially cause more damage in the market.
“Italy and Spain seem to be outliers,” he said of the relatively robust prices of their CDS, which trade at 222 basis points and 307 basis points, according to data provider CMA, compared with 935 basis points for Portugal and 2,150 basis points for Greece. “People think they aren’t at risk of defaulting.”

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