Italy Bond Traders Aren’t Sitting and Waiting for the Next Storm
- From selling BTPs to CDS, investors have options to hedge risk
- Populist coalition is due to reveal budget plans in September
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Three months after the political imbroglio around forming a populist government roiled Italian assets, bond investors are contemplating a fresh hurdle: its first budget, due next month.
The big risk is that the euroskeptic Five Star Movement-League coalition breaks the 3 percent deficit limit set under European Union rules, putting the country on a collision course with the bloc. That’s got traders hunting a variety of strategies, from selling bond futures to buying Euribor options, to guard against the kind of market meltdown seen at the end of May.