“Contagion” has now hit Deutsche Bank, whose stock plunged 15% during the day, to partially recover to “only” 7%. Fear that the next insolvency will burn AT1 bonds, like in the case of the CHF16 billion Swiss francs simply canceled by Credit Suisse, is driving the bank run, which has hit other European banks as well. The fear is justified: Two German banks, Pfandbriefbank and Aareal Bank, announced they won’t reimburse AT1 securities, which are coming to the deadline for a call option.
Deutsche Bank tried to stem the hemorrhage by announcing a redemption of $1.5 billion of subordinated bonds on May 24 ahead of their 2028 maturity. That did not quite work. Five-year credit default swaps for Deutsche Bank rose by 24 points to 193 on Friday, March 24.
