Norway dumps Irish and Portuguese bonds entirely following its rejection of the the greek bailout deal - lighting up on Spain and Italy as the light in the tunnel appears to be another bond trainwreck.....But for every seller , there is a buyer- we'll see whether Norway or Third Point's view is correct.

http://www.creditwritedowns.com/2012/05/norway-dumps-irish-and-portuguese-bonds-switzerland-increases-sterling-reserves.html

*    *    *   *  

Norway’s sovereign wealth fund, which is often seen as a model for others, indicated earlier today that it has continued to reduce its southern European bond holdings, which it has been doing for two years. It no longer has Irish and Portuguese bonds. It reduced its Italian bond holdings by about 20% to NOK26.6 bln. It reduced its Spanish bond holdings by about 14% to NOK15.6 bln.

Euro-denominated bond holdings now account for 39% at the end of Q1, down from 43% at the end of 2011. Norway replaced its reduced European holdings, with Mexican, Brazilian and Indian bonds.

Its portfolio allocation may be of interest to fund managers. At the end of March, 60.7 % of the fund was allocated to equities, 39% in bonds and 0.3% in real estate. Reports suggest its biggest equity holding was Royal Dutch Shell and its largest bond holdings were Treasuries, followed by UK gilts and French bonds.

and.....

http://www.zerohedge.com/news/norway-sovereign-wealth-fund-purges-all-insolvent-eurozone-debt-holdings-us-hedge-funds-buying

Norway Sovereign Wealth Fund Purges All Insolvent Eurozone Debt Holdings, US Hedge Funds Buying

Submitted by Tyler Durden on 05/04/2012 12:14 -0400

• Brazil
 
• default
 
• European Central Bank
 
• Eurozone
• Global Economy
 
• Greece
 
• India
 
• Italy
 
• Mexico
• Norges Bank
 
• Norway
 
• Recession
 
• Royal Bank of Scotland
 
• Steve Rattner
 
• Unemployment

Over the years, our friends at the Norway Sovereign Wealth Fund have gone from jeered to cheered. To wit from March 30: "Remember this from September 2010? "Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts. “The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.” Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity."...Uhm, Big Oops. Needless to say, this stupidity was roundly mocked by Zero Hedge at the time. Yet we can only applaud the fact that unlike other European investors (read primarily Italian banks) which are merely sinking ever deeper into the quicksand by dodecatupling down on pyramid scheme assets, the Norwegian SWF finally "plans to sharply reduce its European exposure while raising investments in emerging markets and Asia-Pacific, the finance ministry said on Friday." While we ridiculed their stupidity in 2010, we applaud Norway's prudence in this case, as unlike other insolvent European entities, the crude-rich country is not falling for the latest round of central planning bullshit, and is finally acting as a fiduciary agent. "We're reducing our European exposure because we see that economic development in the global economy is changing and this should also be reflected in our investment strategy," Johnsen said. "Most likely we'll have to sell some assets in Europe." Remember: in game theory he who defects first, defects best. We expect to see many more funds openly declaring they will commence dumping European assets, all of which are buoyed 100% artificially by the ECB, and US taxpayers, shortly."

One month later the purge is over: "Norway’s sovereign wealth fund sold all its Irish and Portuguese government bonds after rejecting the Greek debt swap and warned that Europe faces considerable challenges." Wait, what's that? The Eurozone's political strongarming (think Steve Rattner and GM) was unable to force the world's most powerful sovereign wealth fund into agreeing to what was essentially extortion when bank after bank noted how delighted they are to be bent over and take an 80% writedown on their Greek holdings. Stunning. But at least we now know who will be suing Greece shortly in an attempt to recoup par value of their strong law bonds: grab the popcorn - Norway vs Greece will be quite a spectacle. As for their dump of Irish and Portuguese bonds, no surprise there: fool me once (in perpetuity) shame on me, fool me twice, shame on Dan Loeb... who was buying everything Norway was selling. We wonder who ends up right.

More:

The $610 billion Government Pension Fund Global returned 7.1 percent, or 234 billion kroner ($41 billion), as measured by a basket of currencies, in the first quarter, the Oslo-based investor said today. Its equity holdings gained 11 percent while its fixed-income investments rose 1.6 percent.

The fund, which voted against Greece’s debt swap this year because it disagreed with being subordinated to the European Central Bank, also said it reduced debt holdings in Italy and Spain amid a broader strategy to cut investments in Europe. The fund added government bonds from emerging markets such as Brazil, Mexico and India.

“Predictability is important for a long-term investor and the euro-area faces considerable structural and monetary challenges,” Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in a statement.

Stocks jumped globally in the quarter after the European Central Bank stepped in with more than $1 trillion in three-year loans to the region’s banks. The rally was tempered toward the end after Spain announced in March it would miss a deficit target and as austerity measures dragged euro-region economies into a recession and boosted unemployment to a 15-year high.

Wait, so precisely the two things we noted in our Subordination 101 post: namely priming subordination nd lack of visibility in a world in which any investor can be crammed down at any moment, are being amplified by the world's biggest sov wealth fund? Good to know. Sadly, to everyone else who has been buying worthless bonds in an ECB-subsidized, furious and futile attempt to dodecatuple down on the worst of the worst in European paper we have one message: enjoy your transitory gains why you can. With SPIs coming to all the other PIIS countries shortly, those who bought first (in 2012) will promptly be last.

and....

http://www.zerohedge.com/news/dan-loeb-and-portugal-connection

Dan Loeb And The Portugal Connection

Submitted by Tyler Durden on 05/04/2012 12:12 -0400

• Bond
 
• CDS
 
• Portugal
 
• Third Point

Portuguese bonds imploded this week with 10Y spreads rising over 70bps, which given its recent performance, got us wondering. For the last few weeks we have commented on the improvements in the Portuguese bond market's yields and spreads - specifically how this seemed much more about the CDS-Bond basis (on cheap carry and renewed confidence in CDS trigger events via ISDA) than simple risk appetite. It was especially surprising given the rest of Europe's sovereign bonds were deteriorating gradually in a somewhat range-bound market. Today we get some insight - courtesy of Dan Loeb's Third Point hedge fund's month-end performance details. The Dapper-Don notes Portuguese Sovereign Bonds as among its top-winners for the month of April - which overall was a poor month for the fund.

We suspect the plan went something like this: Loeb had one of his hedge-fund-huddles; the cartel all bought into Portuguese bonds (or more likely the basis trade - lower risk, higher leverage if a 'guaranteed winner'); bonds soared and the basis was crushed; now that same cartel - facing pressure on its AAPL position (noted as one of Loeb's largest positions at the end of April) - has to liquidate (reduce leverage thanks to AAPL's collateral-value dropping) and is forced to unwind the Portuguese positions. A quick glance at the chart below tells the story of a Portuguese bond market very much in a world of its own relative to the rest of Europe this last month - and perhaps now we know who was pulling those strings?

Portuguese bonds have been on an incredible run (thanks to their illiquidity) and so a fund (or group of funds) could easily allbenefit from a concerted effort...

especially in the basis trade... (where we some profit-taking this month - which fits with our view above)...