• Italian banks drop as value of sovereign holdings plummets
  • Lenders UniCredito Italiano and Mediobanca embroiled in rout

Intesa Sanpaolo SpA led declines among bonds of Italian financial companies as a selloff in euro-area government debt reduced the value of their sovereign holdings.

Intesa’s 1 billion euros ($1.1 billion) of 3.928 percent notes maturing in September 2026 slid 1.72 cents on the euro to 102.29 cents, the lowest since Jan. 7, data compiled by Bloomberg show. The seven-day losing streak is the longest since the securities were issued in September. The Milan-based lender’s 500 million euros of 2.855 percent notes due April 2025 slipped 1.57 cents to 94.52 cents, the lowest since they were issued last month, the data show.

Bonds of UniCredit SpA and Mediobanca SpA also declined as a selloff in Italian government debt sent the nation’s benchmark 10-year yield to the highest this year. Sovereign bond yields have risen across the euro region amid an impasse in Greece’s funding talks and as oil prices climb.
“What you’re seeing is contagion from the Greek situation and from the government bond market,” said John Raymond, an analyst at CreditSights Inc. in London. “Intesa in particular, but also UniCredit and the rest of the Italian banks have huge holdings of government bonds. When they fall, the banks fall with them.”

Italian banks held about 433 billion euros of their government’s debt at the end of March, up from 191 billion euros in March 2009. Spanish banks hold 267 billion euros of their government’s bonds, more than double the 119 billion euros they held in 2009.

Italian lenders have seen the largest declines after Greece’s banks in the Bank of America Merrill Lynch Euro Financial High Yield bond index this month, losing 0.68 percent. Spanish lenders have lost 0.11 percent.

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