What a day... this seemed appropriate...
Dow futures show the utter craziness of the intraday swings today as Japanese collapse led to panic-buying on "Rock Solid" Deutsche comments which led to dumping on oil's collapse after IEA supply glut issues which led to panic buying at the open (amid chatter of Operation Twist 2 by The Fed) followed by panic-selling as oil careened lower only to see stocks ripped higher again as DB unveiled a desperate bond buyback plan... which ran stops and then utterly gailed...
Small Caps were worst on the day... and Trannies ended green...
Much of the day's late-day exuberance was after Deutsche announced a half-hearted desperation play - buying back its "cheap" debt with its scarce liquidity... It failed to even get the stock green on the day...
As we detail here...Deutsche Bank may very well be in trouble.
Late last month, Europe’s most systemically important bank reported a truly epic loss of $7 billion, the first annual loss since the crisis and since then, its CDS spreads have been blowing out as the market begins to contemplate the unthinkable.
Meanwhile, the stock is trading near all-time lows and as we said when John Cryan announced the official results for Q4 and 2015, don’t be surprised to see the equity trading in the single digits by year end.
Even as the likes of Wolfgang Schauble proclaim there’s nothing to worry about, the bank’s own actions tell a different story. As FT reports, the bank is now set to buy back billions in senior bonds to shore up confidence. “After European banks suffered a second consecutive day of sharp falls, Deutsche Bank is expected to focus its emergency buyback plan on senior bonds, of which it has about €50bn in issue,” FT reported in Tuesday afternoon. “
“The bank’s shares still fell 4 per cent, taking the decline since the start of the year to 40 per cent.”
The plan doesn’t involve Deutsche’s CoCos, which have come under heavy pressure over the last several days with yields soaring as the market increasingly doubts the bank’s ability to make good on its subordinate debt. Deutsche will need to make coupon payments in April.
“Deutsche Bank has plenty of scope for a bond buyback, with €220bn of liquidity reserves,” FT notes. Of course the bank’s liquidity position will be diminished thanks to the buyback and the buyback is only necessary because the market is concerned about the bank’s liquidity. So there’s a bit of a chicken-egg scenario going on with this truly absurd attempt to calm markets by reducing debt
In any event, we seriously doubt this will do anything to restore some semblance of confidence in the bank which, you’re reminded, is sitting on a derivatives book equivalent to 20 times Germany’s GDP.
Bargain?...
The collapse of credit risk continues to signal more pain to come for US equities - especially the more credit-sensitive small caps..
Oil's collapse weighed energy stocks down... with financials managing to get back to unch on DB's news...
Financial credit risk spiked to its highest since 2012...
And Energy credit risk hit record highs...
Bonds weren't buying the equity craziness...
Treasury yields were mixed with a weak 2Y auction (after Twist 2 rumors) pushing front-end yields higher and long-end lower...
The Dollar limped lower once again, with early JPY weakness fading and Swissy strength leading the way...
Despite USD weakness, commodities were lower across the board but it was crude and copper that were clubbed...
Charts: Bloomberg