The critical links between Italy’s banking sector and bond market are often characterized as a ‘doom-loop’. When Italian interest rates rise, the value of Italian government bonds falls, reducing the capital buffers maintained by Italian banks, which hold large amounts of Italian debt. But Italian households are also big ‘investors’ in Italian government debt. As today’s sketch shows, the holdings of Italian households dwarf the local government debt holdings of households in other Eurozone countries. Hence, any escalation of the budget conflict between Italy and the European Commission not only hurts the banks, but voters, as well.
As a senior portfolio manager I use charts to illustrate financial issues every day. I tweet my favorites as @jsblokland and was named one of the ‘50 Twitter accounts for investors 2017’ by MarketWatch.
Previous editions of the daily sketch can be found on my personal financial markets blog. All graphics provided are collected from Bloomberg data and public websites. They do not always reflect my personal opinion and may also not necessarily reflect the opinion of Robeco. Please cite all references or quote the original source if replicating content.