The sovereign debt most targeted by short-sellers is not what you might expect, according to DataExplorers.
We’re not entirely sure of the methodology here, but the short-selling specialist has presented this interesting chart. It shows short-selling for selected sovereign debt (excluding sales as part of repo transactions) from smaller and developing economies:
So Romania topped the short-selling scale in January 2009, and is even more of a top-short now. Slovenia and Lithuania are next, followed by Poland, Slovakia and Hungary.
Ireland comes top of the so-called European peripherals, followed by Portugal and Greece. Interestingly, Portugese debt looks to have had the biggest increase in short-selling between the last year and 2010. Spain, presumably, is not included in the selection.
According to DataExplorers, Russia is the only country where short-interest in debt has fallen.
And here’s a bit of interesting commentary from the company:
Some market discussion and sell side research has investigated the linkages between these countries – for example, the Greek banks are said to have lent heavily to Romania and Bulgaria; most of the Eastern European countries have focused their borrowing in Austria. Patterns like these will determine whether isolated defaults become falling dominoes.
Some of these countries may come under the protective mantle of the EU and as a result the short selling may be unjustified; but this in turn focuses attention on the fiscal strength of all the member states. Our data suggests that some money managers see risks even in the largest of the Developed economies – but that is another story.
Full report available here.
Related links:
That lack of Greek contagion – FT Alphaville
Next to the trough… - FT Alphaville
Greece suffers from credibility problem – Gillian Tett, FT
The sovereign debt premium – FT Alphaville