British hedge fund manager Odey short UK government bonds on QE bet

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04/12/2018 | 11:32 am
LONDON (Reuters) - British hedge fund manager Crispin Odey has amassed a short position against UK government debt on the belief that rates will rise, he told Reuters on Thursday.

Odey's bet that British bonds are overvalued totals about 173 million euros (£150.8 million), he said.

"Bonds are very bad value and an easy place to be short," he said. "The question is given that we live in a world in which we basically keep on creating money, at what point does that (value) start to come through?"

Odey said the UK economy "has its dangers", including a large current account deficit and Britain's exit from the European Union, but that the bet was primarily related to QE.

Odey was a prominent supporter of Britain's withdrawal from the EU, signing a letter alongside hedge fund manager Paul Marshall backing the main Brexit campaign group.

He noted that the U.S. 10-year bonds <US10YT=RR> offered a much higher yield of 2.78 percent, compared with 10-year British debt <GB10YT=RR> at 1.39 percent, suggesting that UK debt should rise further.

The 10-year gilt yield has risen around 20 basis points this year, in part reflecting widespread expectations that the Bank of England will raise interest rates in May.

He said the bet was a long-term one for the fund but did not give further details on when he first took out the short.

The bet is second only to Odey Asset Management's position in British broadcaster Sky, in which it holds 0.9 percent.

Odey's European fund is up 12 percent in the year to March 29 after two back-to-back years of negative performance, including last year when the fund lost almost 50 percent, according to data compiled by HSBC.

Odey first launched his hedge fund firm in 1991.

(Additional reporting by Andy Bruce; Editing by Matthew Mpoke Bigg)

By Maiya Keidan

Thomson Reuters 2018
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