Complex bonds backed by mortgages and other debt will cause further writedowns among European banks in the second quarter and could lead to large losses in some cases, according to Moody's, the rating agency.

Two key factors are likely to deliver these writedowns. First, a rise in the risk premiums on US mortgage-backed bonds seen over the second quarter and, second, the continued deterioration in the bond insurers, or monolines, that write guarantees on complex debt products.