SocGen: Bond bear market to hit Goldman and Deutsche the most


A bear market in bonds will crimp trading revenue at Goldman Sachs (GS -0.6%) and Deutsche Bank (DB +2.4%) says SocGen, explaining its initiation of coverage on the two banks with a Sell rating.

"We expect FICC weakness to be an ongoing structural theme - not a temporary issue - in a rising U.S. long interest-rate environment ... As investors veer away from the bond bear market,” look for money to flow into equities, says the team, starting UBS at Buy.

Look for Goldman to curtail its capital return program thanks to regulatory limits on leverage, adds SocGen, and for (Hold-rated) Credit Suisse (CS +1.7%) to take action to boost its own ratios. “There is no getting away from regulatory pressure and the burden it places on investment-bank business models."

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