Italian banks rose in Milan trading, leading gains in the Bloomberg European Banks and Financial Services Index, as Italy’s 10-year yield premium over benchmark German bunds traded close to the lowest in more than two years.
Banca Monte dei Paschi di Siena SpA (BMPS), the nation’s biggest holder of Italian bonds relative to its tangible equity, climbed as much as 3.7 percent, and rose 2.9 percent to 18.19 cents at 11:56 a.m. UniCredit SpA (UCG), Italy’s largest bank, increased 2.6 percent to 5.58 euros and Banco Popolare SC (BP) rose 2.7 percent to 1.44 euros. The FTSE Italia All-Share Banks Index gained 1.7 percent.
Italian banks, which bought government bonds with three-year loans they obtained at lower interest rates from the European Central Bank in 2011 and 2012, are the biggest holders of the country’s sovereign debt. UniCredit owns about 46 billion euros in government bonds, while Monte Paschi holds 26 billion euros, more than three times its tangible capital.
The spread between Italian and German 10-year debt dropped below 200 basis points for the first time since July 2011 on Jan. 3. Italy’s 10-year yield increased 3 basis points to 4.22 percent today and benchmark German rates were at 1.92 percent, widening the difference to 203 basis points.
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