Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, cut its holdings of Italian sovereign debt by 92 percent in the second quarter after boosting them in the first three months of the year.
“Market exposure” to Italian government bonds fell to $191 million at the end of June from $2.51 billion at the end of March, the New York-based firm said in a quarterly regulatory filing today. Goldman Sachs also increased its credit-derivative positions on Italy in the quarter, pushing its total market exposure to Italian government and non-government securities to negative $977 million from positive $2.4 billion in March.
Goldman Sachs discloses the firm’s credit and market stance for Italy, Greece, Ireland, Portugal and Spain each quarter because those five countries are viewed by investors as Europe’s riskiest. The filing today showed that the firm’s total market exposure to the five countries also swung to a negative $977 million as of June from a positive $2.68 billion three months earlier as the bank reduced its position in bonds and stocks and purchased more credit derivatives.
“Credit exposure,” which measures the risk from a default or credit deterioration of the counterparty or borrower, increased to $3.35 billion for the five countries from $2.52 billion in March, the filing showed. The jump reflected a boost in the firm’s credit exposure to Spain to $1.67 billion from $639 million in March, mostly from an increase in non-sovereign exposure, the filing showed.
Derivatives include credit-default swaps, which act like insurance to reimburse a bondholder when a borrower fails to meet its obligations.
Goldman Sachs disclosed that it had written a total of $154.4 billion in notional credit derivatives for the five countries as of June and had purchased $165.2 billion. The company said that “substantially all” of the purchased derivatives were from investment-grade counterparties that are domiciled outside of those five European countries and are collateralized with cash or U.S. Treasury securities.