Government Bond Holdings May, 15 2012 – Italian banks’ holdings of the nation’s bonds jumped in the first three months of the year as the European Central Bank injected more than 1 trillion euros ($1.28 trillion) into the region’s financial system through two offerings of three-year loans. Italy’s sovereign debt held by its banks rose 39 percent to 291 billion euros in those two months, according to Bank of Italy figures, as the country’s lenders took up almost a fourth of the funds offered by the ECB.

“At this stage, a downgrade on Italian banks was likely, given their correlation with the economic cycle and the country’s debt,” said Fabrizio Spagna, managing director at Axia Financial Research. “They have a huge amount of government bonds in their portfolios, which affect their financial positions.”


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