“Hedge funds invested in Greek debt are poised to be winners after European policy makers flinched and raised the price for how much the recession-stricken country would pay to buy back its bonds.
Hedge funds drove up prices for Greek sovereign debt last week after determining that European finance ministers would back off a pledge to pay no more than about 28 percent of face value to retire the nation’s bonds. Money managers correctly wagered that not enough bondholders would participate at that level to get the deal done. That would put at risk bailout funds that Greece needs to stave off economic collapse.
Transactions involving Greek bonds “increased by the day” after it became clear that the buyback was going to happen, with hedge funds accounting for most of the purchases, said Zoeb Sachee, the London-based head of European government bond trading at Citigroup Inc.
“If all goes according to plan, everybody wins,” Sachee said. “Hedge funds must have bought lower than here. If it isn’t successful, Greece risks default and everybody loses.” ”
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