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Hugh Hendry’s zero-carry package

The euro-bear manager of CF Eclectica Absolute Macro Fund is sounding as bearish as he’s been, post the crisis that made his name.And we can thank the up-coming French Presidential election for that.Hugh Hendry is not forecasting a Le Pen win. But he does believe that if she did win we’d all be looking at the very real threat of a Euro zone break up. That’s especially so after Brexit, which Hendry compares with Britain’s departure from the gold standard, which set in motion a chain of events at the time that saw three-quarters of gold standard members abandoning the system within two years.You can read here gloomy quarterly letter in full here. But the defensive bet placed here is structured as…A ‘substantial position’ on the spread exploding between Italian and German 10 year paper. The spread has already doubled to around 200 basis points over the past year; a narrowing to 100bps would indicate the Germans have accepted full blown monetary union with Club Med, which isn’t going to happen. Meanwhile, BTPs denominated in lira would trade where Italian sovereign paper used to trade in lira — at above 10 per cent yields.Long European senior financial credit; short European bank stock futures.

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The euro-bear manager of CF Eclectica Absolute Macro Fund is sounding as bearish as he’s been,...

Paul Murphy
Paul Murphy is the founding editor of FT Alphaville and an associate editor of the Financial Times. He joined the FT in London in 2006 as development editor of, concentrating on the expansion of the online business. Prior to that, he served as the Guardian’s financial editor for seven years. He has also held senior positions in business journalism at the Sunday Business newspaper and the Daily Telegraph. Murphy is a graduate of the London School of Economics.

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