{"id":18219,"date":"2018-08-16T16:59:25","date_gmt":"2018-08-16T13:59:25","guid":{"rendered":"https:\/\/bestinsurance.gr\/a1\/?p=18219"},"modified":"2018-08-16T16:59:25","modified_gmt":"2018-08-16T13:59:25","slug":"goldman-frets-a-huge-shift-in-italian-debt-market-is-looming","status":"publish","type":"post","link":"https:\/\/bestinsurance.gr\/a1\/archives\/18219","title":{"rendered":"Goldman Frets a Huge Shift in Italian Debt Market Is Looming"},"content":{"rendered":"
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Goldman Frets a Huge Shift in Italian Debt Market Is Looming<\/h1>\n<\/div>\n
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  • Banks may no longer be lender of last resort for government<\/li>\n
  • Shortfall in demand on cards as Italy mulls fiscal expansion<\/li>\n<\/ul>\n<\/section>\n
    By\u00a0Samuel Potter(Bloomberg) —<\/p>\n<\/section>\n
    The dreaded sovereign-bank \u201cdoom loop\u201d in Europe may have weakened. Now comes the bad news.Thanks to political risks and regulatory changes, Italian lenders may be reluctant to snap up domestic government bonds during market stresses — a potentially huge structural shift in demand in the euro area\u2019s second-most indebted nation.<\/p>\n

    Goldman Sachs Group Inc. casts doubt on whether such institutions can go on serving as dutiful marginal buyers, a bid that\u2019s historically stabilized a market seen as Europe\u2019s Achilles\u2019 heel.<\/p>\n

    \u201cWhether domestic financial institutions will continue to act as a steady (and potentially increasing) source of demand for sovereign duration remains a fundamental question\u201d, Goldman\u2019s\u00a0Matteo Crimella\u00a0wrote in a note published Wednesday.<\/p>\n

    It\u2019s a pressing issue. As Turkey contagion swept global assets this week and a tech sell-off compounded the risk-off mood, Italian\u00a010-year yields have risen close to four-year highs.<\/p>\n

    \"\"<\/p>\n

    Since the crisis, policy makers and markets have grappled with the\u00a0doom loop\u00a0— the risk weak banks that fund their over-indebted governments destabilize sovereign debt markets, and vice-versa.<\/p>\n

    The prospect home lenders will have the government\u2019s back no longer presents a fresh threat. What happens when those buyers go AWOL is now the key question.<\/p>\n

    The doubts stem from two issues. First, Italian banks are regulated by supranational authorities that are subjecting sovereign exposures to stress tests. That\u2019s a signal supervisors \u201ccould be slowly leaning towards opposing the \u2018home bias\u2019 and making banks\u2019 portfolios more diversified,\u201d notes Goldman.<\/p>\n

    Second, Italy, as ever, faces\u00a0domestic challenges. Populist politicians appear determined to pursue an expansionary budget, fueling concern about debt sustainability.<\/p>\n

    That helped drive the yield spread between 10-year Italian and German obligations to 286 basis points on Wednesday, approaching the widest since May.<\/p>\n<\/section>\n

    \"\"<\/p>\n

    At the peak of the country\u2019s struggles to forge a coalition in May, banks increased their exposure to government notes by 11 billion euros ($12.5 billion).<\/p>\n

    In a stark reminder that the feedback loop is not yet fully vanquished, the capital hit due to Italian sovereign debt swings was\u00a0higher than expected\u00a0in the last quarter for at least two of the country\u2019s banks.<\/p>\n

    All of which may make lenders more reluctant when it comes to jumping into home obligations in the future, reckons Goldman. And it comes at an importune time, as the European Central Bank — the ultimate buyer-of-last-resort — brings its unprecedented stimulus program to a close.<\/p>\n

    \u201cThe need for a \u2018marginal buyer\u2019 of Italian BTPs could increase, especially should the government pursue a bulky fiscal expansion,\u201d wrote Crimella. \u201cAny reluctance of domestic banks to fulfill that role could lead to a shortfall in demand.\u201d<\/p>\n<\/section>\n

    –With assistance from\u00a0Sonia Sirletti.<\/section>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    Goldman Frets a Huge Shift in Italian Debt Market Is Looming Banks may no longer be lender of last resort for government Shortfall in demand on cards as Italy mulls fiscal expansion By\u00a0Samuel Potter(Bloomberg) — The dreaded sovereign-bank \u201cdoom loop\u201d in Europe may have weakened. Now comes the bad news.Thanks to political risks and regulatory<\/p>\n","protected":false},"author":1,"featured_media":13497,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-18219","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18219","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/comments?post=18219"}],"version-history":[{"count":1,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18219\/revisions"}],"predecessor-version":[{"id":18222,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18219\/revisions\/18222"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media\/13497"}],"wp:attachment":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media?parent=18219"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/categories?post=18219"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/tags?post=18219"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}