Unstructured Finance

Spain, not Greece, on the minds of many money managers

By Katya Wachtel

On Sunday, voters in Greece’s parliamentary election gave market-watchers the result they wanted.

But in the minds of many money managers, those election results are little more than a band-aid for the euro zone’s deep and complex debt problems, and their attention is focused further West. Many hedge fund managers say it is Spain – the euro zone’s fourth largest economy and the recent recipient of a 100 billion euro bank bailout – that is the real concern for the stability global financial markets.

“Greece has been off the radar screen since March as far as I am concerned,” said Robert Koenigsberger, founder and chief investment officer at $3.2 billion investment manager Gramercy. “When everyone went to bed on Sunday night, I doubt they were expecting to wake up and find that Spain would be 25 basis points wider. People probably thought there would be a risk-on trade that could give Spain some relief.”

Other U.S-based hedge funds noted that the spike in Spanish yields on Monday reflect where market participants’ real concern lies, as well as skepticism over bank bailout of that country earlier this month.

“With Spanish Yields jumping over 7% [on Monday], no-one was feeling all that positive post-Greek elections,” wrote Jack Flaherty, a fixed income manager at $47.9 billion investment firm GAM.

Deals wrap: Wanna buy an Irish bank?

Ireland’s banks are up for sale, the country’s central bank chief said, as the government seeks to cut them down in size after their reckless lending forced the country to seek an international bailout.

Shares in Bank of Ireland tumbled 29 percent and Allied Irish Banks lost 17 percent as shareholders face dilution from more capital injections, that could see AIB effectively nationalized.

Fortune’s Dan Primack observes how Republican Senator John McCain once used Ireland’s low corporate tax rate as a fiscal beacon, during his presidential run against Barack Obama. “Ireland considers the corporate tax rate to be a cornerstone of its economic well-being, but today that’s like saying that the Vikings consider Brett Favre to be a cornerstone of this year’s Super Bowl hopes,” writes Primack.

Morning line-up

Hedge fund stories from the past 24 hours from Reuters and elsewhere:

rtxcg5sThe Lehman derivatives muddle – FT Alphaville

Ex-AIG chief Cassano back in U.S. – Reuters

Hedgie dies in escalator fall - Fox News

Swiss hit Lansdowne to lure Hedgies – Swisster

Irish FinMin on the hedge fund backing anti EU-campaign – Irish Times

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