Banks are becoming the leading buyers of some euro zone governments' bond sales, taking advantage of surging interest rates as the European Central Bank looks to reduce its presence in the market
"In many transactions, they are the largest buyers," said Pierre Blandin, global head of sovereign, supranational and agency debt capital markets at Credit Agricole CIB, which has arranged many of this year's deals.
They were the top buyers in the European Union's debt sale this month, buying almost 50% of a seven-year bond and 35% of a 20-year bond. Last September, they bought 26% of a five-year bond and 21% of a 30-year, far behind fund managers in second place. "Demand from the bank treasuries in the deals is actually even stronger than what is seen in the statistics, as they generally get allocated a lower of their orders than some other investors," said Belgium debt agency director Maric Post.The data does not give a breakdown of which exact banks are involved, but banks tend to buy the government debt of their home country.
As bond yields rise relative to swap rates, it becomes more attractive for their treasuries to buy bonds rather than hold cash, said Daniel Gilliot, senior asset and liability management officer at BNP Paribas Fortis in Brussels.
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