Bond exodus on a par with eurozone bank run
By Richard Milne
A great deal of attention is being heaped on the possibility of a bank run across the eurozone. But something just as important is currently happening: a bond run.
Foreign investors have left the government and corporate bond markets of Italy and Spain in droves in the past year and there is little evidence of the selling slowing down. If anything, the worry would be that the process carries on for some time as it has done in Greece, Ireland and Portugal.
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There is little doubt that a generalised bank run across several countries would be disastrous. But so far there is scant evidence of it. Deposits at Italian banks have increased in recent months while those at Spanish banks have only dropped slightly.
But it is a different story when looking at foreign capital. JPMorgan analysts estimate €200bn of Italian government bonds and €80bn of Spanish bonds have been sold by foreign investors in the past nine months, more than 10 per cent of each market.