Banks take big risks in government bonds

Erstwhile cornerstone investors have fled the worst-affected parts of the developed-world government bond markets as credit concerns infect the once risk-free rates world. Volatility has risen while liquidity between dealers is much diminished and periodically evaporates. Yet bank dealers still see money to be made in this exciting new world and are opening their balance sheets to issuers and investors. Some will no doubt live to regret it. Peter Lee reports.