August 28, 2017 / 8:55 AM / 10 months ago

Italian banks creep back into domestic govt bonds in July: data

FRANKFURT, Aug 28 (Reuters) - Italian banks added to their huge stock of domestic government bonds in July, data showed on Monday, after two months of sharp selling that had unnerved some investors.

This may help ease speculation that Italian banks, the biggest holders of their country’s sovereign debt, are bracing for market turbulence as the European Central Bank prepares to cut its own purchases and the country faces an uncertain general election.

Italian banks’ holdings of domestic government debt increased by roughly 5 billion euros ($5.97 billion) last month, according to Reuters calculations based on ECB data, leaving them holding 381 billion euros worth of that paper.

The biggest fall on record in June, at 20 billion euros, had sparked concerns that lenders were trimming their exposure in anticipation of a fall in prices when the ECB eventually winds down its 2.3 trillion euros bond-buying programme, aimed at lowering borrowing costs and boosting inflation.

Italy is also set to hold a general election by next May, with the country’s euro membership among the issues dividing public opinion. ($1 = 0.8381 euros) (Reporting By Francesco Canepa; Editing by Susan Fenton)

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