Banks to Raise Government Bond Holdings on Basel III, Morgan Stanley Says

Capital rules for banks agreed by central bankers and regulators under the Basel III accord will encourage lenders to buy government bonds to boost ownership of “high-quality liquid securities,” Morgan Stanley said.

“The combined effect of the various elements of Basel III is to continue to encourage banks to increase their holdings of government bonds,” Laurence Mutkin, head of European fixed- income strategy in London, wrote in a report today. A delay to the full implementation of requirements will be “offset by the fact that the pre-implementation observation period” begins “very soon,” he said.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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