in sti giorni da ambrosio ad alphabet stanno tutti spulciando i vari m3
ieri hanno tirato fuori il dato strano dell'italia
An Italian M3 mystery
Posted by
Joseph Cotterill on May 27 10:09. Eurozone money supply is contracting all over at the moment — except in Italy.
Which is curious. And possibly sovereign debt-related.
According to Jamie Dannhauser of Lombard Street Research, year-on-year M3 contractions of 2 per cent and 3.4 per cent have respectively hit Germany and Spain recently, but . . .
. . . in Italy, the monetary picture is completely different: year-on-year M3 growth remains robust at 6.5%, even more so when one considers that underlying inflation is only slightly above 1%. [See chart below:]
Which, Dannhauser argues, may be due to some frisky buying of Italian government bonds:
Unlike banks across mainland Europe, Italian banks are continuing to expand their private sector loan books; but this is not the main reason for the relatively rapid increase in the money supply. Instead, the major stimulus to monetary growth has been a huge increase in net lending to the Italian government, as banks have gone on a shopping spree for public sector debt. Covertly, the local banking system has bought the majority of securities issued by the Italian government to finance its budget deficit over the last year. Notwithstanding the positive monetary consequences, this has left Italian banks heavily exposed to a deterioration in sentiment towards Italian government debt.
Well — let’s note some caveats first. Italy’s banks are fairly robustly capitalised and government bonds seem to have been a large part of their portfolios for a long time, as this chart shows:
But — that late uptick in buying is odd, especially since Italy has attracted attention to the size of its public debt since the Greek crisis, and the spread of contagion to the Iberians. And it also comes amid a huge
ECB bond-buying programme.
And as Dannhauser adds, banks have focused on the BTP market — emphasis ours:
In the year to Q1, net BTP issuance was €67bn, according to the Treasury department. Meanwhile, according to figures from the Banca D’Italia, domestic banks’ holdings of BTPs rose by €34bn –
i.e. more than half the net issuance. Since this figure includes any capital gains/losses that banks may have accrued on these securities, it is not an ideal measure of banks’ net purchases of BTPs; but, based on other data series that are available, we do not believe this alters the main point that Italian banks have been the major buyer of BTPs in recent quarters.
Curiouser and curiouser.
Italy rolls over a lot of BTPs, and rather regularly too — an inflation-protected €1.5bn issue is set for Thursday, plus €9.5bn nominal issuance on Friday. Which may be an accident waiting to happen, as Dannhauser notes:
Although the public sector deficit is relatively low in an EA context at around 5% of GDP, gross debt issuance remains substantial. While immediate fears that the Italian government will not be able to pay its bills are not the problem, we are concerned about potential illiquidity problems (i.e. underbidding) for Italian government debt if banks look to reduce their exposure.
Well, if it can happen to
bunds…
