CDSs on banks under UK asset protection programme widen

The cost of credit protection on UK banks rose marginally this morning. As the deadline of March 31 for UK banks to sign up to the government's asset protection programme approaches, banks already participating in the scheme saw their CDSs widen the most.

Five-year senior credit default swap (CDS) spreads referencing Royal Bank of Scotland (RBS) moved out from 187.8 basis points at close of trading last night to 192.5bp as of 11:25 GMT this morning, according to data from credit information specialist CMA Datavision. CDSs referencing Lloyds also widened to 186.7bp from 183.5bp. Both Lloyds and RBS are participating in the asset protection programme.

Meanwhile, CDSs on Barclays - which stress tests have revealed may hold sufficient capital to avoid signing up to the programme, according to media reports today - widened from 193.4bp to 195bp. HSBC, which has not received government support, saw its CDSs move out to 141.2bp from 141bp.

The cost of credit protection on Swiss banks decreased this morning. Credit Suisse - which reported a net loss of Sfr8.2 billion for 2008 this week - saw its spreads narrow from 183bp to 180.2bp. CDSs on UBS tightened from 228.1bp to 225.4bp.

In Germany, CDSs referencing Commerzbank - which reported a net loss of €6.6 billion for 2008 today - moved out from 125bp to 128.9bp, while spreads on local rival Deutsche Bank remained steady at 120bp.

The cost of credit protection on US financial institutions continued to rise yesterday. CDSs referencing US banks have begun to widen over the past two days, having initially narrowed after US Treasury secretary Timothy Geithner announced a plan to relieve US banks of their toxic assets on March 23.

CDSs on Citi widened to 577bp as of close of trading yesterday, from 559.2bp on Wednesday. Elsewhere, Bank of America saw its CDSs jump to 342.9bp from 330bp; spreads on Goldman Sachs moved out from 272.9bp to 280.8bp; CDSs on Morgan Stanley widened to 378.8bp from 375.9bp; the cost of credit protection on Wells Fargo increased from 248.3bp to 252.5bp; and JP Morgan saw its CDSs move out to 186.6bp from 183.3bp.

Western equity markets have registered losses so far in today's trading. London's FTSE 100 index was down 0.59% at 3,902.12 as of 14:15 GMT; Paris' Cac 40 had fallen 1.46% to 2,849.99; Frankfurt's Dax index was down 1.51% at 4,194.93; and in early morning trading, New York's S&P 500 index had tumbled 1.97% to 816.49, having made a gain of 2.33% yesterday.

See also: CDSs referencing US banks widen