European Bank Problem: Deutsche Bank Stock Under Pressure Due to High Cost of Default Insurance – Deutsche Bank (NYSE:DB)

Deutsche Bank AG database Shares came under pressure following a spike in credit default swaps amid persistent concerns about the stability of European banks.

Deutsche Bank’s credit default swaps (CDS) – a form of insurance for bondholders – went up by 200 basis points (bps) – the most since the start of 2019 – from 142 bps, according to data from S&P Market Intelligence. On the basis, reuters informed of.

“Deutsche Bank has been in the spotlight for a while, just as Credit Suisse was,” said Stuart Cole, a principal macroeconomist at Equity Capital. “It has gone through several reorganizations and changes of leadership in attempts to get it back on a solid footing, but so far, none of these efforts have really worked.”

In the wake of the collapse of the US-based Silicon Valley Bank, emergency rescue Of credit suisse group inc C By UBS AG UBS Further tightening of monetary policy by the US Federal Reserve raised concerns of contagion among investors.

The US Federal Bank raised interest rates by 25 basis points in March 2022, representing its 9th consecutive interest rate hike since it began tightening policy. Chairman Jerome Powell indicated that further increases may be necessary.

Read also: UBS in talks to acquire Credit Suisse, Blackrock denies takeover bid,

Deutsche Bank’s Additional Tier One (AT1) bonds come under pressure after Credit Suisse had to stop writing about $17 billion last week,

Its CET1 ratio – a measure of bank solvency – came in at 13.4% at the end of 2022, while its liquidity coverage ratio stood at 142% and its net stable funds ratio at 119%, according to Q4 Earnings Release.

Moody’s suggested that, as central banks continue their efforts to control inflation, the longer financial conditions remain tight, the greater the risk that “the stress spreads beyond the banking sector, to more causes financial and economic loss,” cnbc informed of.

Price Action: Last Check: DB shares are down 10.4% at $8.65 during the premarket session on Friday.

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