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Financial Credit Risk in Europe Increases to Highest Since 2013 

February 10, 2016

Tom Beardsworth, Bloomberg Business

A measure of credit risk for banks and insurers in Europe rose for a ninth day, climbing to the highest level since 2013.

The Markit iTraxx Europe Subordinated Financial Index of credit default swaps (CDS) insuring lower-ranking debt increased as much as 15 basis points to 318 basis points, and was at 306 basis points at 5:40 p.m. in London, according to data compiled by Bloomberg.

Investors are increasingly concerned that weak earnings and a global market rout will make it harder for banks to pay the interest on their riskiest securities, or to buy them back as soon as they’d hoped. Deutsche Bank AG became the largest lender in at least four years to feel compelled to reassure investors and employees that it has enough funds to service that debt.

“We’ve seen horrendously bad earnings at certain banks and signs that they’ll stay under pressure,” said Suvi Kosonen, a senior credit analyst at ING Bank NV. “It’s really difficult to say how or when the market is going to turn.”

Rout Deepens

Bonds that allow banks to skip interest payments without defaulting and turn into equity or are written off in times of stress are coming under particular pressure. Read more

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