Rising yields on European public sector and bank bonds are dragging down the profits of Westpac Banking Corp as it re-values securities held for trading and liquidity purposes.Gail Kelly, chief executive of the bank, told Westpac's annual general meeting, held in Sydney yesterday, that "global uncertainty and the associated market volatility continue to weigh on our revenues from our markets and treasury businesses including the negative revaluation of our liquid assets."As of September 2011, Westpac's exposure to the debt of offshore governments and foreign banks was trivial. The bank's quarterly pillar 3 report shows negligible holdings of sovereign and bank debt in offshore markets, and scarcely any of that was to European names.Westpac almost doubled its holdings of bonds, to A$39 billion, over the six months to September and put its holdings of liquid assets at $103 billion. One third of these are self-securitised home loans.In the 2011 financial year, ended in September, similar factors to those cited yesterday by Kelly contributed to a decline of $170 million, to $640 million, in Westpac's market income, though most of this decline was in the relatively benign first half of the year.On the other hand, Westpac Institutional Bank reported a fall of $44 million in "markets trading related income" in the second half of the year, though it's not clear what the first-half or the prior year comparisons are.