“Italian banks’ purchases of the country’s sovereign debt rose to a record in June as concerns that Italy may be forced to seek a bailout discouraged foreign investors.
Banks boosted their holdings of Italian government bonds by about 14 billion euros ($17 billion) in June to 316 billion euros, according to a Bank of Italy report today.
Italian banks “have been holding the fort at government debt auctions in the absence of foreign investors,” said Nicholas Spiro managing director of Spiro Sovereign Strategy in London by e-mail. “The run on the bond markets of Spain and Italy continues unabated and domestic banks have been left to pick upthe slack. The question is how much longer they will be able to plug the gap if foreign investors continue to steer clear of Spanish and Italian debt.”
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