The latest data on foreign ownership of peripheral government debt markets confirm that there has been a stabilization, if not a small increase, in foreign ownership of peripheral debt markets.

To get a deep insight of these data, Barclays Capital supplemented them with forecasts based on the bank's flows at the end of September. Here are Barclays' main findings:

1. Italy and Spain have had foreign ownership decline 15-20 percentage points (a relative decline of 30-50% of the foreign holdings), from Q4 10 in Spain and mid-2011 in Italy. Most of these liquidations were absorbed by the ECB Securities Markets Programme or domestic investors (especially financial institutions).

2. While it is encouraging that foreign holdings have been stable recently, it is clear that a return to the previous regime is unlikely: some of the change in the investor base would appear to be (at least semi-) permanent, driven by ratings or benchmark changes, risk appetite, etc.

3. About two thirds of the active ‘leveraged’ short base in Spain has already been covered in July/August, so any increase in foreign holdings will have to originate from more ‘real money’ foreign investors coming back to the Spanish market.

Based on these findings, Barclays constitutes its base case as follows:

"The foreign ownership of Spanish government debt will be roughly stable. Even if the starting point of foreign ownership in Italy is higher than in Spain (and the short/underweight position has never been as large as in Spain), we see, if anything, more room – and inclination – for foreigners to buy Italian debt where the outright size of the Italian market makes it difficult to be excluded completely."