Naked shorts to be allowed ahead of bund auctions
Dealers reassured that Bafin short selling ban will not prevent pre-hedging of debt purchases
Primary dealers for German government bonds will be allowed to put hedges in place prior to an auction, in apparent contravention of the newly introduced rule banning naked short positions on government bonds, the Bundesanstalt für Finanzdienstleistungsaufsicht (Bafin) told Risk today.
Dealers had worried that the rule, introduced with no warning late on May 18, would prevent them from pre-hedging auctions and therefore make it harder for the German government to sell bonds.
"Investors will take
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