RTRS-EFSF’s REGLING SAYS ASKED HIMSELF IF BOND WAS TOO CHEAP, GIVEN DEGREE OF OVERSUBSCRIPTION
RTRS-EFSF’S REGLING SAYS WANTED TO BE ON SAFE SIDE WITH PRICING OF BOND
And there could well be more than few denizens of Mayfair who’ll be thanking you very kindly for that tonight, Mr Regling.
According to the FT’s hedge fund correspondent Sam Jones, Tuesday’s hugely oversubscribed order book for the EFSF’s first bond included a smattering of fund managers. (Alongside the Japanese, who did indeed buy up over 20 per cent of the issue, as they had promised to do.)
The rationale seems to have gone like this:
Some funds have bought peripheral CDS as part of a bearish view that Europe won’t be able to solve its sovereign debt problems (putting the prospect of defaults into play).
During the crisis, the natural hedge for this has been peripheral bonds:
But for a number of reasons — a certain central bank among them — the pricing of the periphery may no longer be quite so efficient.
Of course a perfect hedge to political changes in Europe winning or losing the crisis isn’t out there either, given that we don’t precisely know what solution it’s going to require. But — well, while we’re waiting…
…the EFSF is pretty cheap, at least.
And considering that peripheral bets aren’t necessarily going to be huge part of a fund’s strategy — that probably suited Mr Regling’s customers rather well.
Here in any case are the final deal statistics (H/T Anousha Sakoui):
ORDER BOOK: €44.5BN
# OF ACCOUNTS: 500+
ALLOCATION BREAKDOWNGEOGRAPHY: ASIA 38%, UK 15%, GERM 12%, NORDIC 9%, FR 7%, BENELUX 6%, OTHER 5%, N.AMERICA 2%, OTHER EUR 2%, IT 2%, SWITZ 1%, AUSTRIA 1%
INV TYPE: CB/OI 43%, FUND 31%, BK 13%, INS 6%, PENS 3%, CORP 1% PB 1%, OTHER 1%, HEDGE 1%
Related links:
Hedge funds – FT / In depth
Touching negative basis in Ireland – FT Alphaville