July 6, 2018 / 1:31 PM / 9 months ago

UPDATE 1-Italy's Target2 liabilities rise in June to new record

(Adds details and background)

MILAN, July 6 (Reuters) - The Bank of Italy’s liabilities towards other euro zone central banks touched a new record high of 480.94 billion euros ($563 billion) in June, up from 464.65 billion euros the previous month, data published by the central bank showed on Friday.

In the last two months, the Bank of Italy’s position with the European Central Bank’s Target2 payment system, which settles cross-border payments in the euro zone, rose by 55 billion euros.

In the same period, both the Milan stock exchange and the Italian government bond market recorded an increase in volatility as the far-right League and the anti-establishment 5-Star Movement joined forces to form a new government.

A country’s Target2 position is monitored as a sign of financial stress and imbalances within the euro zone.

Analysts say increased volatility on the markets may have dampened foreign demand for Italian assets, but the widening of its Target2 balance has several causes.

The ECB considers it mainly a technical phenomenon resulting from the settlement of the bond purchase programme the central bank has been carrying out to boost euro zone inflation.

$1 = 0.8543 euros Reporting by Francesca Landini

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