Italian Bank Holdings Of Italian Debt Rise To All Time High

Tyler Durden's picture

Wondering why the Italian bond market has been stable and "improving" in recent months, with yields relentlessly dropping as a mysterious bidder keeps waving it all in despite the complete political void in the government and what may be months of uncertainty for the country, and despite both PIMCO and BlackRock recently announcing they are taking a pass on the blue light special offered by BTPs? Simple. As the Bank of Italy reported earlier today, total holdings of Italian bonds by Italian banks hit an all time record of €351.6 billion in February.

Why are local banks loaded to the gills in the very security that may and will blow up their balance sheets when the ECB loses control of the European sovereign risk scene as it tends to do every year? Because courtesy of ECB generosity, Italian debt continues to be "cash good collateral" with the ECB, and as a result Italian banks can't wait to pledge and repo it with Mario Draghi in exchange for virtually full cash allottment. In other words, the more debt the Italian Tesoro issues, the more fungible cash the Italian banks have to spend on such things as padding up their cap ratios and making their balance sheets appear like medieval (any refernce to Feudal Europe is purely accidental) fortresses.

Source: Reuters and Bank of Italy

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zorba THE GREEK's picture

How does one hold bankrupt debt as an asset? It's Cyprus on a grand scale.

BaBaBouy's picture

Sheet, They're All Fecked ...

EVERYBODY EU Is Holding Thier Own Debt ...

It's Like I Want A Million Dollar House, So I Create $1M Via Myself And THIN-AIR, And Lend It To....... Myself!!!

hooligan2009's picture

you have defined QE exactly..except you have forgotten the hardest part..you have to dress up in a suit, stay in expensive hotels, eat the best quality food and talk to other jerks who also wear suits and are doing the same thing...

Winston Churchill's picture

We are about to find out when 401k's are 'encouraged' to buy those shitty

UST's from the FedRes.

toys for tits's picture

Those banks must have plenty of depositors to cover this debt.

Alexi-Alexi's picture

just a fraction, thanks to the fracitonal reserve system

Zerohedgers should unite and open own bank, put some capital in give yourself 10 times the amount in loans and shut the bank down....then repeat...

Bearwagon's picture

They went That-a-Way!

sudzee's picture

A nice little bail-in would cover that debt quite nicely. Better do it soon before depositors bail into bitcoin.

Mototard at Large's picture

They are hooked on bad debt just like an addict is hooked on crack.  Here is an explantion of the currenct financial crisis using crack cocaine and bankers to explain the debt and over leveraging issue.  A simple explanation for non-ecomists.

http://tinyurl.com/cntzebc

Dr. Engali's picture

How big of a haircut are you willing to take for king and country Mr. Sheeple?

Village Smithy's picture

Once again we see the TBTF mentality distorting markets. Going all in relying on the belief that the worst case scenario is a well telegraphed bail out where these banks will be on the inside, dollar cost averaging all the way to the pre-arranged bottom setting themselves up for the rocket powered return trip. 4 years ago I would have thought this only a fool's game, today, barring an asteroid strike, it's sure to be a winner.

Tense INDIAN's picture

ANy BIG industrial people here...looking for a piece of the best INDUSTRIAL land in INDIA:

 

http://chennailanddeals.blogspot.com/

toys for tits's picture

Hahaha,

The ad said that where the land is located is the "Detroit of India". Does that mean that they're giving the land away?

Bam_Man's picture

Have the Italian bank runs started yet?

buzzsaw99's picture

Spain loads up the pension funds, Italy the banks. Fun times.

NEOSERF's picture

Remind me to stop paying my mortgage next month, everyone else has and really, what is the point when you look at the coming tsunami.

newworldorder's picture

All is well in Europe untill the Germans, French and Dutch citizens are asked to pay up on the promises, backstops and guarantees their governments pledged not only to sovereign bond purchases through the ECB, but ELA as well. Wait till the taxpayers in Germany do the math on the acumulated promises. Will we all be suprised at the "measured" German response. Will Draghi's "strong political capital invested in the EU" - carry the day and for how long?

ATM's picture

They will never be asked to pay directly because they would certainly say "Nein!"

How they will end up paying is by the stealth method - money printing. The ECB will print. They say they won't they aren't allowed by law but they will. When the SHTF they will print and they will print like motherfuckers, just like everyone else.

smbc1066's picture

During the 2008 crisis in the US, when the Fed opened the discount window primary dealers dashed to off load the most toxic pieces in their box in exchange for AAA quality collateral-a purely risk free arb.

NoWayJose's picture

The Romans used to chain their galley slave rowers to the ship as encouragement to row hard in battle, lest the ship lose the battle and sink. History doesn't always repeat, but it sure does rhyme. The Italian banks are now chained to the government... And the ship is taking on water...

knukles's picture

The banks buy the sovereign debt of bankrupt countries and go bankrupt because of the bankrupt sovereign debt only to be bailed out by the bankrupt sovereigns whose bankrupt debt they own and the bankrupt sovereigns finance the bailout by selling more bankrupt debt to the bankrupt banks.

 

Sounds like Fire Sign Theater

forwardho's picture

Jeese knukles, I got a brain ache just reading that.

swissaustrian's picture

Holding bonds of your own government is like a suicide belt of a suicide bomber in terms of banking: If you go down, the government goes with you, so the gov is forced to rescue you.

bnbdnb's picture

What is wrong with the financial system? IT.IS.A.JOKE.

AynRandFan's picture

Never fear.  After the haircut comes the bail-in.

forwardho's picture

Forget this dust mote, 361 billion.

Take the beam from thine own eye, what % of U.S. bonds are being puchased by our own treasury?

All the centrals are using imaginary funds to purchase an imaginary reality.

hiper66's picture

Bail-out, bail-in, QEx, ZIRP, ELA... all to fill the void left by the no longer growing oil supply!