DAX Plunges To 1 Year Lows As Deutsche Bank CoCos Crash, Italian Bank Stocks Slide

Tyler Durden's picture

The collapse of Deutsche Bank continues to not just accelerate but to contagiously spread...

Deutsche Bank's CDS continues to push higher...smashing European bank risk to its highest since 2013...

 

And now Deutsche Bank's Contigent Capital securities are crashing - these are among the lowest securities on DB's capital structure and are screaming that problems loom.

In English - CoCo bonds are contingent convertible bonds, and are converted into equity first in case of a bail-in.

 

Dragging the entire German market down - DAX down to 1-year lows...

 

As Bloomberg reports,

This focus on potential credit risk at some of the biggest banks is a shift from recent years, when they seemed resilient from a credit standpoint even as analysts raised doubts about their future profitability. After all, regulations that prompted them to cut costs and reduce risk-taking would probably make them better able to meet their debt obligations, at least in theory.

 

But that theory only goes so far, and not enough apparently to justify buying subordinated financial debt that could get wiped out in a worst-case scenario. Investors seem to be rapidly selling lower-ranked bank securities, particularly notes tied to European firms with significant exposure to commodities companies and borrowers in China.

 

Investors really don’t have a sense of just how much pain banks will feel from souring energy prices and the global growth slowdown. Many are not waiting around to find out.

It's not just Germany though: moments ago Italian bank stocks slid to intraday lows following news that the government's banking industry decree was reported to be postponed to next week, pushing BTP futures down 66 ticks at 138.79, lingering near session low of 138.55.