MNI SOURCES: Bank Of Greece Blames Sell-Off On Italy Contagion

By Luke Heighton

     LONDON (MNI) - Recent falls in Greek bank share prices are a product of

contagion fears over Italy's budget plans and the health of Italian banks, and

come despite an improvement in the credit profiles and liquidity of Greek

lenders, sources close to Bank of Greece Deputy Governor John Mourmouras told

MNI.

     The correlation between the yield premium investors require for holding

Greek government bonds instead of benchmark German debt has risen to over 70%

since the formation of Italy's populist government in June, up from correlations

of around 50% earlier in 2018 and around 20% in mid-2017, the sources said.

     "As the sharp sell-off of Italian sovereign debt in response to the new

populist government's anti-austerity budget has caused familiar fears to

resurface over the country's banks, investors have also sold off the Greek bank

shares, dragging them to record lows despite their recent credit profile

upgrades from the international rating agencies and their impressive liquidity

improvements," they said.

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

[TOPICS: M$X$$$,MT$$$$,MX$$$$,M$$EC$]