Foreigners Are Fleeing The Spanish Bond Markets

European banks are supposed to be deleveraging. By now, most realise they are headed the opposite direction. In Spain, the increased leverage is pro-cyclical, 100% certain to cause a bigger problem down the road.

Here is a Mish-modified translation of an El Economista article on Spanish Bond Purchases.

Financial institutions have become the main investor in Spanish government bonds after foreigners withdrawn €89.6 billion in the first eight months of the year, according to Treasury data.

In these eight months, Spanish exposure has risen €108.8 Billion, a record 106.84% increase.

Meanwhile, foreign investment in Spanish debt has dropped 31.8% during the same period, standing at €191.836 billion euros, compared to €281.439 at the end of 2011.

This is the second consecutive time since 2008 that the debt in foreign hands is below the €200 billion.

Banks are now the main investor, ahead of foreigners, accumulating now 34.07% of the public debt, compared to 33.49% by foreign investors. This situation has not occurred since 2003.

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