Bond issuers to rein in orders from hedge funds

Bond issuers to rein in orders from hedge funds

The European Central Bank’s massive bond-buying program has fueled a bonanza in eurozone sovereign debt, with some investors vastly overstating their orders at debt sales in a bid to secure the coveted paper. But now some governments are starting to say enough is enough.

Borrowers including the European Union, France and Spain are moving to rein in orders from hedge funds in their syndicated bond sales, a government official and four banking sources involved in the deals told Reuters. The aim is to stem a deluge of inflated orders from these funds, which vastly overstate their demand in an attempt to guarantee they secure their desired amount of bonds, according to the sources.

“The concern is that if you don’t have the correct picture, you might make mistakes in the future about what the actual demand for the bonds is,” said Stelios Leonidou, who manages Cyprus’s debt issuance. He told Reuters he had raised the issue with banks, but did not say Cyprus planned to curb orders. [Reuters]

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