Managers cautious on bank debt despite sharp declines

Financials still under pressure from unfinished business in the eurozone and the threat of downgrade for banks

Fixed interest managers have warned against investing in bank debt despite sharp falls in values caused by Moody’s threat to downgrade 14 UK banks last week. Credit default swaps on European senior financials widened substantially on Monday 23, from 145 basis points to 155 basis points, while yield on sterling denominated financial debt widened about 20 basis point. The moves followed Moody’s warning UK banks are at risk because the government may not bail them out in the event of a new crisis. Ongoing fears over the European sovereign debt crisis have also contributed to the movement...