According to the Financial Times, authorities in Athens told banks handling this week’s sale of €5 billion ($6.8 billion) Greek bonds to make sure they did not allocate any bonds to hedge funds, on fears that hot money inflows could hurt the country’s economy.
“Don’t sell to hedge funds,” Greek regulators told banks handling the sale.
The move was aimed at stopping speculators who could make use of the bond sale by undermining the Greek debt market and driving the country further towards a possible default.
Ideally, the government bond managers would sell their bonds to “buy and hold” type investors as apposed to hedge funds who are known to cause sharp swings in bond prices as they try scalping for fast profits.
But if the strategy was an attempt to entice such investors as asset managers, pension funds, or life insurance companies rather than hedge funds ; well, the idea didn’t really work. Greece’ new 10-year bonds, payable at an annual interest rate of 6.37%, twice the rate on comparable German bonds, attracted hardly any trading on Friday. One hedge fund manager was quoted by FT as saying: “Here is a country struggling to sell its bonds. Surely it should not be turning away buyers.”