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James Foster, co-manager of the £282m Artemis Strategic Bond fund, said the structured investment vehicles that ran into trouble last year would soon be due to pay back their debt. This would land institutions with even greater liabilities, he said.

"Banks have marked up rates because they can't get funds, which they used to get from Sivs. On top of that, the Sivs are maturing, which means they will have to repay tens of billions of pounds a year."

A survey of 15 major international banks conducted by Artemis with Bloomberg revealed that just three banks had raised more capital than their losses during the turmoil - RBS, Crédit Agricole and Lehman Brothers.

Six of them gathered less than half of the amount lost, including HSBC, the only other UK player on the list.

Mr Foster painted as dire a picture of the sector as any of his peers. But as governments were prepared to help recapitalise financial institutions, he said high-quality bank debt now looked attractive.

"Globally, things are getting very difficult, with inflation rising across the board. Authorities would love to cut rates, but central bankers are worried inflation may get ingrained. Then workforces will demand wage increases to compensate for a loss of spending power. Mr Trichet is raising rates even though the European economy is flat on its back.

"But inflation is a sideshow to the real problem, which is the banks. The banks have got themselves into a real pickle. The extent of the losses is so great it prevents them from doing their day job of lending money. They definitely won't be buying back debt. They can't afford to. The only thing they can do is recapitalise themselves."

Mr Foster said, given the dearth of cash for acquisitions, bond managers could hope to benefit from all-share mergers in the sector, including emergency mergers forced by governments on banks.

"There isn't enough profitability in the system, so it's inevitable you will get consolidation."

Mr Foster said he had already made 10 per cent on a position in Alliance & Leicester, which Banco Santander acquired last month. "Ten per cent for a bondholder is very exciting."

He said he now holds 16 per cent of the fund in bank debt and has stopped looking for bargains elsewhere.

"With such a big percentage in banks, I'm not looking at investing in other sectors."

Mr Foster regretted avoiding inflation-linked debt last year, but he said yields were already too low for him to invest.