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Deutsche Bank's Stock Is Falling As Its Cost Of Default Insurance Keeps Rising

Deutsche Bank's Stock Is Falling As Its Cost Of Default Insurance Keeps Rising
After a steep increase in the cost of insurance against default risk late the day before fueled concerns about the general health of Europe's banks, Deutsche Bank shares dropped for a third consecutive day on Friday.
So far this month the value of shares of Deutsche have gone down by a fifth of their value shares were last trading at 8.843 euros ($9.57), down 5.5%, not far from the five-month low set on Monday.
According to data from S&P Market Intelligence on Thursday, they closed 3.2% lower while the bank's credit default swaps (CDS), a kind of protection for bondholders, rocketed up to 173 basis points (bps) from 142 bps the day before.
According to Refinitiv statistics, this is the biggest one-day increase in Deutsche's CDS that has ever occurred.
In the meantime, some of Deutsche Bank's bonds were also sold off. The yield on its 7.5% Extra Tier-1 dollar bonds increased to 22.87% after falling by 1 cent to 74.716 cents on the dollar. Data from Tradeweb shows that the yield has increased by double since just two weeks ago.
Since Credit Suisse was compelled to write down $17 billion of its AT1s as part of a forced takeover by UBS over the weekend, pressure has increased on bank-issued AT1.
European banks have had a rough week, with developments at Credit Suisse and turmoil among regional US banks fueling concerns about the global banking sector's health.
The STOXX 600 index of European banks, which excludes Credit Suisse and UBS, has had one of its most volatile trading weeks in a year. The index was recently down 2.1%, on track for a 17% monthly fall.

Christopher J. Mitchell

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