Another classic Meriwether trade involved the Italian bond market.9 Italy’s cumbersome tax rules deterred foreigners from investing in the country’s bond market; as a result, demand was suppressed and the bonds were a bargain. A foreigner who figured out how to get around the tax obstacle could buy the bonds and collect a yield of, say, 10 percent. Then he could hedge the position by borrowing lire in the international money market at perhaps 9 percent, pocketing the 1-percentage-point difference.
