Deutsche Bank Boosted by Cheaper Credit Default Swaps

Deutsche Bank has received a much-needed boost after initial trading of a new financial product made it significantly cheaper to hedge against doing business with the under-fire German bank, the Financial Times reported. The cost of buying the new credit default swaps — derivatives that pay out if a company defaults on its bonds — has halved compared with the previous benchmark. This is important because Deutsche has been struggling with spiralling funding and transaction costs as investors have worried about dwindling investment bank revenues and low profitability. Multiple credit rating downgrades have led to reduced business with the lender and ever-higher interest rates on its debt. “This will lower the cost for counterparties hedging exposures to Deutsche,” said James von Moltke, chief financial officer. “It also creates a level playing field for German banks versus their European and US peers.” Read more