Avenue Capital's Marc Lasry: We like European bank loans

European banks are under immense pressure, but at least one prominent hedge fund has found what it thinks is a good opportunity in the wreckage.

Marc Lasry, co-founder and chief executive of hedge fund Avenue Capital, told CNBC that European banks continue to be a big opportunity for distressed investors – particularly the loans these banks are sitting on.

"Most banks are being forced by the European Central Bank to sell loans and therefore we're able to buy those loans at a great discount. The ECB will likely continue to put pressure on these banks to clean up their balance sheet," he said in an interview.

In terms of where in Europe Avenue Capital is looking, Lasry says go north.

"We're currently looking at Northern Europe because their legal system is the best," he said.

Banking analysts say it is easier to buy bad loans in northern Europe, because if you default you are penalized more promptly than in some southern European jurisdictions.

But Lasry is less enthusiastic about another recently hot sector: bonds with negative yields. Less than two years ago, negative yielding bonds didn't even exist; now, according to the JPM Global Bond Index, it is a $5.5 trillion market. Last week the Bank of Japan shocked markets by pushing interest rates negative.

"Negative yielding bonds – to us it makes no sense. Nobody gives us money to lose money. Better to stay in cash," Lasry said, adding that buyers in the sector were mostly after a safe haven.

"Only thing people care about right now is safety. Everyone is worried about not losing money and being safe," he said.

He is also cautious on another popular hedge fund trade: shorting the Chinese yuan.

Managers like Kyle Bass are betting that the Chinese government will allow the currency to fall further to boost exports and growth. But it is still unclear how much the government will allow the yuan to fall in the coming months.

"I understand why investors are shorting the yuan. China is slowing down. However I have no idea whether the Chinese government is going to defend the RMB or not," Lasry said.