China to buy Italian bond

The latest & most intriguing story coming out of Europe is that China is going to buy more Italian bonds, possibly as much as 7-billion euro. For more, go here or here.

Here are some points from the article:

1) China Investment Corp chairman Lou Jiwei led a delegation to Rome last week to speak with Italian Finance Minister Giulio Tremonti and Cassa Depositi e Prestiti -- "a state-controlled entity that has established an Italian Strategic Fund open to foreign investors." This is one of multiple meetings between Italian and Chinese officials.

2) China already holds a significant amount of Italian debt -- one Italian official told the FT it holds about 4% of Italy's 1.9trillion euro public debt.

3) Sources specified in the report are "Italian officials." They said further negotiations will be forthcoming.

(Source: Clusterstock)

This breaking news led to some late buying, which trimmed losses among major European markets overnight.

Update: I agree with the opinion of Pragmatic Capitalism, that this Chinese move will have very limited impact. To wit:

China can “help” ease the strains in the Eurozone by buying bonds of various periphery nations. This helps kick the can in the debt game, but does NOTHING to solve it. We know this because we’ve already seen this movie once before. China made waves last year when they announced a firm commitment to buy Greek bonds. Of course, this announcement soothed markets for a few months and then the underlying trends took hold again and we all know what’s going on in Greece today.

For more, go here.