Why speculators shun euro sovereign debt

by John Dizard

Financial Times
February 27, 2011

You might think that grubby bond dealers and treacherous Anglo-Saxon hedge fund short-sellers would be rooting around in the markets for “peripheral” European sovereign debt. With a summit of the euro area leaders called for March 11, surely there would be all sorts of opportunities for profitable speculation on the backs of, say, the Greeks or Portuguese?

Well, not really. I know a lot of those bond dealers and hedgies, and most of them are watching the European leaders and think-tankers on television screens with the sound off. Occasionally they grunt at some moves on the screen, then turn away, as if it was some not-very-compelling fixed wresting match, which is close to the truth. They are not betting much, if any, money on the outcome.

Among the pointless obsessions of the euro area political leadership is a conviction that speculators must not be allowed to profit from the euro sovereign debt crisis. The euro politicos don’t seem to be open to the possibility that speculators are largely absent, let alone masterminding some Bond-villain-grade scheme.

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