Market crash 'could hit within weeks', warn bankers
www.telegraph.co.uk/finance/financialcr ... withi\
n-weeks-warn-bankers.html
Insurance on the debt of several major European banks has now hit historic
levels, higher even than those recorded during financial crisis caused by the US
financial group's implosion nearly three years ago.
Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas,
Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on
Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis
points, meaning the annual cost to insure £10m of the state-backed lender's
bonds against default is now £343,540.
The cost of insuring RBS bonds is now higher than before the taxpayer was forced
to step in and rescue the bank in October 2008, and shows the recent dramatic
downturn in sentiment among credit investors towards banks.
"The problem is a shortage of liquidity that is what is causing the problems
with the banks. It feels exactly as it felt in 2008," said one senior
London-based bank executive.
"I think we are heading for a market shock in September or October that will
match anything we have ever seen before," said a senior credit banker at a major
European bank.
Despite this, bank shares rebounded on Wednesday, showing the growing disconnect
between equity and credit investors. RBS closed up 9pc at 21.87p, while Barclays
put on 3pc to 149.6p despite credit default swaps on the bank hitting a 12-month
high. This mirrored the US trend, with Bank of America shares up 10pc in late
Wall Street trade after a hitting a 12-month low on Tuesday over fears that it
might have to raise as much as $200bn (£121bn). As with the European banks, the
rebound in the share price was not reflected in the credit markets, where its
CDS reached a 12-month high of 384.42 basis points.
European stock markets joined in the rally. The FTSE closed up 1.5pc at 5,206 on
hopes the chance of a global recession had diminished. European shares hit a
one-week high, with Germany's DAX closing up 2.7pc and France's CAC 1.8pc
higher. The Dow Jones index edged higher on strong durable goods orders data as
markets began to accept that the US Federal Reserve is unlikely to signal fresh
stimulus at Jackson Hole this Friday.
Even Moody's decision to downgrade Japan's sovereign credit rating by one notch
to Aa3 did little to damage global sentiment, although Tokyo's Nikkei closed
down just over 1pc.
As stock market nerves settled, gold - which has recorded steady gains recently
as investors seek a safe haven - fell 5.3pc to $1,777 in London
www.telegraph.co.uk/finance/financialcr ... withi\
n-weeks-warn-bankers.html
Insurance on the debt of several major European banks has now hit historic
levels, higher even than those recorded during financial crisis caused by the US
financial group's implosion nearly three years ago.
Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas,
Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on
Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis
points, meaning the annual cost to insure £10m of the state-backed lender's
bonds against default is now £343,540.
The cost of insuring RBS bonds is now higher than before the taxpayer was forced
to step in and rescue the bank in October 2008, and shows the recent dramatic
downturn in sentiment among credit investors towards banks.
"The problem is a shortage of liquidity that is what is causing the problems
with the banks. It feels exactly as it felt in 2008," said one senior
London-based bank executive.
"I think we are heading for a market shock in September or October that will
match anything we have ever seen before," said a senior credit banker at a major
European bank.
Despite this, bank shares rebounded on Wednesday, showing the growing disconnect
between equity and credit investors. RBS closed up 9pc at 21.87p, while Barclays
put on 3pc to 149.6p despite credit default swaps on the bank hitting a 12-month
high. This mirrored the US trend, with Bank of America shares up 10pc in late
Wall Street trade after a hitting a 12-month low on Tuesday over fears that it
might have to raise as much as $200bn (£121bn). As with the European banks, the
rebound in the share price was not reflected in the credit markets, where its
CDS reached a 12-month high of 384.42 basis points.
European stock markets joined in the rally. The FTSE closed up 1.5pc at 5,206 on
hopes the chance of a global recession had diminished. European shares hit a
one-week high, with Germany's DAX closing up 2.7pc and France's CAC 1.8pc
higher. The Dow Jones index edged higher on strong durable goods orders data as
markets began to accept that the US Federal Reserve is unlikely to signal fresh
stimulus at Jackson Hole this Friday.
Even Moody's decision to downgrade Japan's sovereign credit rating by one notch
to Aa3 did little to damage global sentiment, although Tokyo's Nikkei closed
down just over 1pc.
As stock market nerves settled, gold - which has recorded steady gains recently
as investors seek a safe haven - fell 5.3pc to $1,777 in London
