Hedge funds dominate eurozone government bond trading, data show
Account for two thirds of trading in Italy39;s bonds data
Funds favour shortterm strategies, debt auctions, sources say
Hedge funds can pull out at any time posing a stability concern

LONDON, March 19 Reuters Hedge funds are piling into  the euro zone39;s 10 trillion government bond market, scenting opportunities as funding needs surge and the European Central Bank retreats.

The funds are buying a large share of government debt sales, providing a source of muchneeded capital, traders and officials say. Yet the lightlyregulated investors often load their bets with bank debt, tying their fortunes to lenders, at a time when there is growing regulatory concern globally about their market impact.

Interviews with more than a dozen sources, including senior traders and treasury officials, as well as market data compiled exclusively for Reuters by electronic platform Tradeweb, show that hedge funds have become increasingly entrenched in the bloc39;s debt market.

Hedge funds accounted for a record 55 of European government bond trading volume on Tradeweb last year, up from 36 in 2020, displacing other financial firms to become the dominant players for the first time.

And their reach was largest in some of Europe39;s most indebted nations hedge funds comprised twothirds of trading volumes of Italian debt on Tradeweb, the data compiled for Reuters showed.

Tradeweb is one of the top three trading platforms…