Deutsche Bank is not Lehman and this is not 2008, Lex says ...
Deutsche Bank is not Lehman Brothers and this is not 2008.
Deutsche Bank AG
€15.19
17:30 23/09/24
DJ EURO STOXX 50
4,871.54
23:59 20/09/24
Xetra DAX
18,846.79
17:00 23/09/24
That’s was the word on Wednesday from the corporate finance wonks at the Financial Times’s Lex column.
Prices on credit default swaps for banks’ subordinated debts, a type of financial derivative used by fund managers to insure against debts not being repaid, had risen by two-thirds thus far in 2016, as per Markit’s iTraxx index.
Trading volumes had also increased by more than a fifth compared to where they stood one year ago.
Even so, volumes were still low by historical standards, the tipsters judged.
Furthermore, it can be “tricky” to buy CDSs for a specific lender, so buyers tend to buy baskets of them, pushing up the entire index.
Prices on CDs also looked “high” Lex said.
An actual default on a conventional bond was unlikely, Lex added. European banks would first have to eat through about $283bn of shareholders’ equity raised since 2008.
So while the past week may have felt ‘dicey’, “this is not 2008 – and Deutsche is not Lehman,” Lex said.