Sorry, why are US banks' credit default swaps going up?

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In spite of appetite for US banks being healthy and at the top of the S&P upward trend, their CDS keep rocketing, too, at quite a pace (+7,72% on Thursday). The graph pictures the changes from May-June. We fear is a correlation effect from what’s happening to Chinese banks. Details from Barclays Capital:

“China closing for lunch off 37bps, noticeably less phased by the stream of commentary overnight about problems in the shadow banking industry, SMEs, etc., than the H share market, looking at SHCOMP arguably a lot is already priced in. HK a very different story with H shares off 3% and the Hang Seng off 2.1%.  H shares selling is across the board and brutal –in the banks Ag Bank off 8%, China Mingsheng off 10%, BOCOM off 5.8%, in the props likes of Evergrande off 15%, Agile off 7.5% and Shimao off 5.7% and FAI plays back on their back.

“Chinese airlines failing to get the usual CNY associated bid and more focused on weak golden week travel forecasts, Air China off 5.8%, China Eastern off 8%.  Luxury names getting belted after US China consumption plays hit – Prada off 10%, Luk Fook off 9.5%, Brilliance off 12.4%.  Finally Macau getting hit between the eyes on Chinese slowdown fears and US overnights, Wynn off 14%, Sands off 12.8%.”

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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