EU bonds favoured over swaps as hedge for European debt
Hedge funds are increasingly using the bonds to hedge Bunds and OATs as swap correlations decline
Bonds issued by the European Commission are increasingly being used as proxy hedges to European government bonds rather than using traditional euro interest rate swaps, with correlations shifting thanks to quantitative tightening and liquidity improvements in EU debt.
Traders say the moves have been driven by falling premiums on Bunds as the European Central Bank (ECB) unwinds its bond buying
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