Shares of Deutsche Bank (NYSE: DB) were on a downslide in pre-market trading on Friday after Reuters reported that the bank’s credit default swaps (CDS), a form of insurance for bondholders shot to a four-year high. Credit default swaps are financial swap agreements where the CDS seller compensates the buyer in case of a debt default.
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According to the report, Deutsche’s CDS shot to 175 on Thursday which was its ” largest one-day gain on record,” citing Refinitiv data.
Moreover, the bank’s 7.5% additional tier (AT1) dollar bonds dropped by around $0.03 to 72.868 cents on the dollar, resulting in a yield up to 24%. Citing Tradeweb data, this yield is “more than double what it was just two weeks ago.”
AT1 bonds have fallen in value after the Swiss financial regulator wiped out $17 billion of Credit Suisse’s (CS) AT1 bonds as a part of its merger with UBS (UBS). This contagion effect also hit UBS which was also down in pre-market trading on Friday.
Overall, analysts remain cautiously optimistic about DB stock with a Moderate Buy consensus rating based on seven Buys, four Holds, and two Sells.
