The last time a Primary Dealer decided to go all in on the Italian "recovery", MF Global went bankrupt. This time around the bank that apparently can't get enough of Italy (and to a smaller extent Spain) and its glorious taxpayer funded, bailed out future is none other than JPM, which according to its earnings presentation has seen its net exposure to Europe double from $6,3 billion to $11.7 billion, following a surge in Italian trading exposure. Surely this will end very well for the bank that only 5 months ago had to reshuffle every executive in its internal $300 billion hedge fund for massive IG9 CDX losses.
Q3 Net European Exposure driven by a surge in Trading securities in Italy and Spain to a total of $14.4 billion: (source)
Q2 Net European Exposure - Italy and Spain trading exposure was just $10.2 billion: (source)
Keep in mind, the Spanish and Italian sovereign bond market is extremely illiquid and a buyer of $5 billion in bonds in these two countries could alone be responsible for a major portion of the P&L move. Which is preicsely what JPM enjoys doing: finding an illiquid product which it can monopolize (ahem IG9) and then becoming the market.
Keep a close eye on this product because when the latest European bailout fizzles, JPM will be the one way train leaving Europe and crushing all the piggy backing hedge funds in its wake.