Italy's Target2 debt falls to pre-Covid level in February

MILAN (Reuters) - Italy's liabilities towards other euro zone central banks fell by almost 40 billion euros in February, central bank data showed on Thursday, possibly reflecting foreign investor inflows to the euro zone third-largest economy.

Data published by the Bank of Italy showed Italy's Target2 debt decreased to 466.538 billion euros ($508.25 billion) from 504.434 billion euros at the end of January.

The latest Target2 debt figure was the lowest since February 2020, before the COVID-19 pandemic triggered heavy investor outflows from Italy. It compares with a record high of 714.93 billion euros in September 2022.

Luca Mezzomo, head of macroeconomic analysis at Intesa Sanpaolo, said the decline since early 2023 was a sign of increasing foreign purchases of Italian government bonds, among other factors.

"The trend should continue in coming months," he said, helped by a reduction in the European Central Bank's asset purchase programmes, an improvement in Italy's current account balance, and ongoing foreign appetite for Italian debt.

Rome started publishing the data in September 1997.

The European Central Bank's funding to Italian banks were almost flat at 146.280 billion euros at the end of February compared with 146.262 billion a month earlier, the Bank of Italy data also showed.

($1 = 0.9179 euros)

(Reporting by Sara Rossi, editing by Gavin Jones)

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