Greece may well prove to be a taste of things to come, in our view. However, the speed and extent of any contagion are hard to predict . We think that the 50-year+ low in government bond yields (real and nominal) seen in this cycle will not been seen again for many years to come. In effect, the size of the public debt burden means that the ‘risk-free rate’ has become more risky.




Many investors look to the banks as a natural source of demand for sovereign debt going forward, but we think this is likely to come at a cost in terms of less credit availability in the wider economy and lower ROEs for the banks themselves.

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