Aug. 9 (Bloomberg) — Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, cut its holdings of Italian sovereigndebt by 92 percent in the second quarter after boosting them in thefirst three months of the year.

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“Market exposure” to Italian government bonds fell to $191million at the end of June from $2.51 billion at the end of March,the New York-based firm said in a quarterly regulatory filingtoday. Goldman Sachs also increased its credit-derivative positionson Italy in the quarter, pushing its total market exposure toItalian government and non-government securities to negative $977million from positive $2.4 billion in March.

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Goldman Sachs discloses the firm's credit and market stance forItaly, Greece, Ireland, Portugal and Spain each quarter becausethose five countries are viewed by investors as Europe's riskiest.The filing today showed that the firm's total market exposure tothe five countries also swung to a negative $977 million as of Junefrom a positive $2.68 billion three months earlier as the bankreduced its position in bonds and stocks and purchased more creditderivatives.

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“Credit exposure,” which measures the risk from a default orcredit deterioration of the counterparty or borrower, increased to$3.35 billion for the five countries from $2.52 billion in March,the filing showed. The jump reflected a boost in the firm's creditexposure to Spain to $1.67 billion from $639 million in March,mostly from an increase in non-sovereign exposure, the filingshowed.

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Derivatives include credit-default swaps, which act likeinsurance to reimburse a bondholder when a borrower fails to meetits obligations.

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Goldman Sachs disclosed that it had written a total of $154.4billion in notional credit derivatives for the five countries as ofJune and had purchased $165.2 billion. The company said that“substantially all” of the purchased derivatives were frominvestment-grade counterparties that are domiciled outside of thosefive European countries and are collateralized with cash or U.S.Treasury securities.

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