March 30, 2011
The news that S&P has downgraded the credit quality of Greek and Portuguese debts at both a sovereign and corporate level has once again thrust these struggling nations back into the limelight. This is despite reports that many in the EU are keen to restructure both Greece and Portugal. We look at institutional ownership information alongside short selling data to see professional investor trading sentiment. Our headline observation is that institutions have never owned fewer Greek, Portuguese and Irish Government bonds.
First up, Greece. The volume of Greek government bonds owned by funds that permit securities lending is a bellwether for institutional ownership. The data shows that these funds went as underweight (compared to their benchmark) as they could or sold their holdings entirely, mainly during the April to July period last year, when the first bail out took place. Until very recently, there was little movement. In the last few days their holdings of Greek Government debt dipped below USD 8 billion for the first time.
Clearly, mutual funds are negative on the outlook for Greek debt overall and have sought to deploy their funds elsewhere. It is interesting to note that short sellers are not active, with demand to borrow Greek sovereign debt trending lower. This is not a short selling story.