VisualMod t1_jdjvgdf wrote on March 24, 2023 at 10:34 PM

#2,343,977

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SatisfactoryFinance t1_jdjwcwj wrote on March 24, 2023 at 10:40 PM

#2,344,088

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.

[deleted] t1_jdjwgq6 wrote on March 24, 2023 at 10:41 PM

#2,344,106

[removed]

Mediocre_Sympathy_65 OP t1_jdjwpsu wrote on March 24, 2023 at 10:43 PM

#2,344,138

Replying to SatisfactoryFinance (#2,344,088)

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

B3stAuD1t0rofA11tiME t1_jdjwxr2 wrote on March 24, 2023 at 10:44 PM

#2,344,162

Replying to SatisfactoryFinance (#2,344,088)

Didn’t they change the acronym to something else because of 2008 but basically the same thing

SatisfactoryFinance t1_jdjxax5 wrote on March 24, 2023 at 10:47 PM

#2,344,208

Replying to Mediocre_Sympathy_65 (#2,344,138)

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.

icemanredbaron t1_jdjxb9n wrote on March 24, 2023 at 10:47 PM

#2,344,209

Replying to B3stAuD1t0rofA11tiME (#2,344,162)

That’s CDO not CDS

Better-Scientist272 t1_jdjxc9j wrote on March 24, 2023 at 10:47 PM

#2,344,210

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.

amonsterinmypants t1_jdjy5aa wrote on March 24, 2023 at 10:53 PM

#2,344,295

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.