Submitted by Mediocre_Sympathy_65 t3_1211921 in wallstreetbets
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Comments
SatisfactoryFinance t1_jdjwcwj wrote
I don’t have a super well researched answer for you, but from general observations:
CDS were a huge issue in 2008 (that I know) and deutsche bank seems to have some fairly large exposure to them. If they have to payout on a bunch of CDS then that could be significantly problematic for them.
Mediocre_Sympathy_65 OP t1_jdjwpsu wrote
It makes sense now if they have an exposure to CDS something I didn’t know. I thought CDS Buyers were paid by a clearing house such as insurance companies in case of default
SatisfactoryFinance t1_jdjxax5 wrote
Well someone has to be on the short end of the CDS. Though they could insure/hedge those losses but it’s hard and $$$ I assume now.
In 2008 all the banks that had the short end of the CDS went and got it “insured” by the insurance companies. The amount of notional insured back then screwed the insurance companies, zapped liquidity, and the markets froze up.
So I think people are just afraid of that happening again, I don’t know enough about todays markets to know how true or false that is.
B3stAuD1t0rofA11tiME t1_jdjwxr2 wrote
Didn’t they change the acronym to something else because of 2008 but basically the same thing
icemanredbaron t1_jdjxb9n wrote
That’s CDO not CDS
amonsterinmypants t1_jdjy5aa wrote
If you are paying more to protect your investment (bonds) it is because the insurer believes that the issuer (DB) is risky and more likely to default.
Mediocre_Sympathy_65 OP t1_jdjyiug wrote
Okay well but in the case the surge could eventually be speculative, it suddenly makes no sense right ?
amonsterinmypants t1_jdk24ru wrote
Yes, just as stocks go up it can be speculative
VisualMod t1_jdjvgdf wrote
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[deleted] t1_jdjwgq6 wrote
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VisualMod t1_jdjza3v wrote
#Submission Vote Removed This submission was voted spam. ##Reasons
Wasn't a Solid Discussion Starter
Historical-Salad-931 t1_jdjy7zq wrote
Fractional reserve banking is a virus 🦠
Better-Scientist272 t1_jdjxc9j wrote
I think that’s exactly what it means. Why would you willing pay more to insure debt for a company that you think is doing absolutely fine. you pay more for insurance when your risks are larger not smaller. Credit Susie spreads have gone through the roof over the last year and look what happened to them.