Arbitrate in euro govies

E

EarlofBarrett

Hi, I’m seeing a lot being made of the bund to peripheral spread in eurozone. 90bps spread between German and Italian.

Is there an arb here? Short bund, long Italy? How would institutional investors take advantage of this in practice? Pretty novice question I suspect but any insight would be appreicated.
 
calling this in 'arb' is very wishfull thinking ... a lot can go wrong with this ... stay far away from this would be my advise ... it's a big gamble and trading should not be about gambling imho ...
 
It's not an arb... it's more of a spread bet, or well basically a bet on the ecb to keep bailing out aka buying bad sov debt of italy and others...

Can go very wrong, for instance look at the greek debt haircut of 50% in 2011...
 
cvds16 said:
calling this in 'arb' is very wishfull thinking ... a lot can go wrong with this ... stay far away from this would be my advise ... it's a big gamble and trading should not be about gambling imho ...
More...

Agree, thanks, arb with hindsight is not the right word.
 
JamesJ said:
It's not an arb... it's more of a spread bet, or well basically a bet on the ecb to keep bailing out aka buying bad sov debt of italy and others...

Can go very wrong, for instance look at the greek debt haircut of 50% in 2011...
More...

Yeah thanks a spreadbet is a better way of putting it. I was wondering if there is any mechanism to lock in the spread for a period, for example if you were to enter a repo on the German debt and a reverse repo on the Italian.

Probably demonstrating my flawed understanding of repo but appreciate you comments.
 
This is not an arb. It's an RV trade. An institutional investor, can play the bonds and/or default swaps.

PS: arbitrate is the wrong word. you're thinking of arbitrage.
 
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