
Traders blame bail-in for Deutsche CDS jump
Debt subordination behind spread widening from January; CVA desks may need to adjust hedge ratios

The soaring cost of default protection on Deutsche Bank may not be all it seems. Recent weeks have seen the bank's share price collapse amid speculation it may struggle to raise the capital needed to cover a new settlement with US authorities, but traders believe an accompanying surge in Deutsche Bank's credit default swap (CDS) spread is at least partly a result of Germany's new bail-in rules – a conclusion that also has implications for how dealers measure and hedge exposure to the German bank
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