German shorting ban increases market instability in Europe

Politically expedient move has hit bond investor confidence

Monday 31 May 2010 at 17:00

The ban on naked short selling of sovereign bonds and sovereign credit default swaps, as well as the shares of 10 leading financial firms, introduced unilaterally and without warning by the German government on May 18, introduces an ominous precedent to financial markets.

So far the ban has been spectacularly ineffective. A domestic curtailing of global instruments achieves very little.