Biggest bet against Italian government bonds after the 2008 financial crisis were placed by hedge funds due to growing concerns about the political situation and the country’s dependence on natural gas imports from Russia.

The total value of Italian bonds borrowed by investors to bet on falling prices reached its highest level since January 2008 at more than 39 billion euros this month, according to S&P Global Market Intelligence and the Financial Times.

Investors’ desire to bet against Italy comes as the country faces growing economic problems due to rising gas prices in Europe, against the background of reduced supplies from Russia and the political climate ahead of the September elections.

“This is the most vulnerable (country) in terms of what happens to gas prices as well as political unrest,” said Mark Downing, chief investment officer of BlueBay Asset Management.

Last month, the IMF warned that a possible cut in Russian gas supplies would send Italy into a recession of more than 5% if it does not receive gas from supplies from other countries.

Italy is also viewed by investors as one of the most vulnerable countries after the European Central Bank decided to raise interest rates and stop buying bonds.

A period of relative political calm that began with the appointment of Mario Draghi as prime minister in February 2021 ended in July when the former head of the ECB stepped down. Early elections are now scheduled for September.

^{According to FT}