Euro-area plans to ensure banks have additional capital buffers are a “distraction” from the need to address sovereign-debt risks, Royal Bank of Scotland Group Plc said.
“This is not the 2008/2009 crisis where the focus was on private-sector debt and the fragility of bank-lending decisions,” Harvinder Sian and Simon Peck, London-based interest-rate strategists at RBS, wrote in an investor report on Oct. 14. “This crisis is about the fragility of vast amounts of periphery European Monetary Union debt as default risk of sovereigns becomes more probable. These sovereign debt issues are only being dealt with half-heartedly.”
Sian and Peck said in the note their “view on the periphery remains deeply negative to the point that we think all European government bonds except bunds are speculative.” That’s likely to push benchmark German bund yields 50 basis points lower over two months, they wrote.