Shorting Italian Debt Delivers 24% Return for ETP Investors

(Bloomberg) -- A well-timed bet against Italian debt is paying off as government bonds reel across the globe.

An exchange-traded product that aims to deliver five times the inverse performance of 10-year Italian sovereign bonds climbed as much as 24 percent Tuesday as political turmoil sweeps Rome and sparks fears for the euro project. That’s the biggest one-day jump ever for the ETP that is typically used by traders to take advantage of short-term price swings.

Yields on benchmark 10-year notes hit the highest level in four years Tuesday as Italian populist leaders who oppose European Union spending restrictions began mobilizing for a fresh election. It’s a quick win for the investors that poured a record $8.2 million euros ($9.5 million) into the Boost BTP 10Y 5x Short Daily product over the past two days.

The security, which has been trading since 2015, uses futures contracts on Italian sovereign debt to amplify moves in the underlying asset in order to deliver outsize returns.

To contact the reporter on this story: Yakob Peterseil in London at ypeterseil@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Sid Verma, Natasha Doff

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