UPDATE 1-Foreigners shed 23.5 bln eur of Italy debt in Dec-BOI

Wed Feb 22, 2012 5:53am EST

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(Adds comment from BoI)

ROME Feb 22 (Reuters) - Foreign investors sold a net 23.5 billion euros of Italian debt in December after an even steeper selloff the previous month amid tensions over the sovereign debt crisis in the euro zone, Bank of Italy data showed on Wednesday.

The data comes from a month in which Italian 10-year bond yields were still at potentially crippling levels of around 7 percent during a critical phase of the crisis.

The December data "mirror the crisis' most acute phase," the Bank of Italy said in a separate comment. They "confirm what was evident in market prices for Italian government bonds and something which had already taken place in November."

Market concerns about the sustainability of Italy's 1.9 trillion euro debt pile peaked in November, precipitating a change of government as the country's debt costs spiralled to 8 percent also on short maturities. Over that month, foreigners sold a net 27.1 billion euros of Italian debt.

Ten-year yields have since come down to around 5.5 percent, helped by a ready supply of cheap longer-term funding provided by the European Central Bank and by growing market confidence in the government of technocrat Prime Minister Mario Monti, who was sworn in on Nov. 16.

Sales of government bonds by foreign investors had been partly compensated by purchases from locals, the Bank of Italy said without providing a figure.

Italians sold a net 10.5 billion euros in foreign securities in December, the data showed.

The central bank also pointed to a slight improvement in the current account balance as weak internal demand curbed imports while exports performed decently. (Reporting By James Mackenzie and Valentina Za; Editing by John Stonestreet)

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