The potential for euro-area policy makers to recapitalize the region’s banks may prevent the safest government bonds from extending this year’s advance, Royal Bank of Scotland Group Plc said.
“We are all being a bit more circumspect and less gung-ho about our bond-bull stance,” Andrew Roberts, head of European rates strategy in London, wrote in an investor report on Oct. 7. “We are hardening this circumspection on two things: bank recapitalization and consensus-view change.” Such a plan for the region’s lenders “risks a bund shake-out,” Roberts wrote.
German 10-year bonds fell last week, pushing the yield up to 2 percent on Oct. 7 from 1.89 percent on Sept. 30. Still, the yield has slid almost 1 percentage point from 2.96 percent on Dec. 31.