Credit spreads for European financial debt protection widen

The cost of credit protection for European banks has widened significantly this week as negative fundamentals dominated market sentiment. Five-year credit default swaps for major European banks widened between 1 to 10 basis points for senior protection this week, with protection for BNP Paribas, Société Générale, Dresdner Bank and HVB Group all more than 5bp wider for the week.

Deutsche Bank was hit harder. Five-year senior protection on the German bank traded at 48/58bp today, up 8bp on the week. This followed the publication of a Goldman Sachs equity analysis report yesterday that cited concerns about Deutsche Bank’s corporate credit risk. There were also rumours that Deutsche Bank may issue a profits warning, traders said.

Five-year senior protection on Credit Suisse debt was trading at 100bp, up 10bp on the week. The Swiss financial services group issued its fourth