Deutsche shares rally amid debt buyback reports

Deutsche Bank shares experienced a roller coaster ride this week, following a price drop of almost 10 percent on Monday, they now shot up by up to 14 percent, amid reports that the group was planning a multibillion buyback of its senior debt.

As the Financial Times reports, Deutsche is said to focus its buyback on senior bonds, the group has currently issued €50bn worth of senior bonds.

However, according to the Financial Times, the plan is unlikely to include contingent convertible bonds (CoCos), which have suffered some of the sharpest losses this week.

Deutsche has currently issued nearly €2bn in CoCos, their price has fallen by 19% since the beginning of the year.

CoCos are the riskiest form of bank debt because they convert into equity once a banks capital falls below a certain threshold, thereby passing the losses on to the bond holder.

In addition, they give the issuer an option of missing coupon payments, which has now turned into an immediate concern for holders of CoCos.

The volatility at Deutsche also affected other financials, shares in Credit Suisse, another major issuer of CoCos, fell by 7% yesterday but rose by more than 4% today. Similarly, shares for Santander, which also issued CoCos, recovered from yesterday’s plunge rising by more than 5 percent as of noon UK time.

Mona Dohle
Mona Dohle speaks German and Dutch and is DACH & Benelux Correspondent for InvestmentEurope.
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