July 25, 2013 / 8:27 AM / 7 years ago

CORRECTED-Spanish, Italian banks buy govt bonds in June -ECB

(Corrects comparison month to May from April in paragraph 4)

FRANKFURT, July 25 (Reuters) - Spanish, Portuguese and Italian banks stocked up on government bonds in June, European Central Bank data showed on Thursday, as investors’ search for higher returns kept demand for peripheral euro zone debt high.

The prospect of the ECB’ policies remaining ultra-easy for months, despite debate over whether the U.S. Federal Reserve might slow its bond buying, propped up demand for higher-yielding assets.

Spanish banks increased their government bond holdings by 16.1 billion euros in June after a 20.7 billion increase in May.

Italian banks also kept adding to their sovereign debt holdings, recording a 10.8 billion euro increase after a 19.6 billion rise in May, while Portuguese banks added 1.2 billion euros worth of government bonds into their portfolios in June.

Banks’ holdings of government bonds, when adjusted for market value, hit a new record high in all three countries.

The ECB data do not break down which countries’ debt banks hold, but with a recent easing of market pressure on the governments struggling most with high debt, foreign and local investors are returning to euro zone bond markets. (Reporting by Sakari Suoninen)

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