Deutsche Bank Death Spiral Hits Historical Low. European banks follow

The bottom fish were taken out on the back and shot.

It does not just deal with Deutsche Bank – or with European banks in general. A new day, a new scandal, a new historical low in the stock price that has been in a death spiral for over 10 years. Deutsche Bank shares doubled 7% today in Frankfurt, to a new historical low of € 7.00, shortly to threaten to close at a shameless € 6.99. Its market value is now down to just 14 billion euros. The shares have risen 56% so far this year:

The EU Commission – EU Executive Branch – after nearly three years of investigation of this, announced today there are suspected four unnamed banks of colluding to manipulate the major US dollar market – denominated government-guaranteed bonds between 2009 and 2015.

"The EU Commission has informed four banks of their preliminary perception that they have violated EU competition rules by collaborating between 2009 and 2015 in order to distort competition in secondary EEA trade by US government bonds, sovereigns and agencies (SSA), says the statement.

The Commission has "concerns" that the four banks "exchanged commercially sensitive information and coordinated on prices …" it said. "These contacts would have taken place mainly through online chat rooms. "

Deutsche Bank and Credit Suisse confirmed that they are among the four.

This is just the last in an endless series of claims about the ruin and costly settlements of such things. This is in addition to the bank's rolling portfolio, so to speak, of operational and financial problems.

Deutsche Bank's contingent convertible bonds – designed to be bailed when the bank's regulatory capital falls below a certain level – is a measure of what the market thinks about the chances of such an event. They are unsecured indebted bonds that can be canceled when regulators believe that the bank needs more capital to avoid toppling. In this case, the shareholders and Co-Co Bondholders will probably be eliminated by taking the first loss. Other creditors can get a haircut. And taxpayers would be shanghaied to pay for additional capital as needed.

With these risks, Co-Cos has a fairly high coupon payment in the first place, to make them attractive. And now 6% Co-Cos is on it again and gives an opinion about the possibilities for collection – they have dumped and closed at 83.6 cents today:

The Deutsche Bank share has been In a dead spiral since 2007, following an intense price bubble, which followed the conservative bank for Germany Inc. and German retail customers, turned out to be a global player in almost everything that has caused banks to collapse. The bottom fish were regularly taken out of their backs and shot.

But it is not just Deutsche Bank. The equipment is an example of a broader development in Europe, the years after the financial crisis, the years of zero interest rate and negative interest rate policy – ZIRP and NIRP – were not used to rebuild bank capital and clean up balances and get rid of defaulted loans but instead used to maintain sovereign debt to euro countries whose governments can not handle a hard currency they can not devaluate, such as Greece, Italy, Spain and Portugal. Improvement of central government debt worked.

But the banks, the economic infrastructure of an economy, are a huge untouched risk. Under the new rules, bailouts will now wipe out, or at least crush, shareholders and some junior creditors, such as Co-Co Bondholders, before taxpayers will be shanghaied to clean up the rest.

Today, European banks, as shown by Stoxx 600 Bank's index, declined 2.5%. The index has doubled 33% from the 52-week high in January:

But go back a decade, this 33% plunge is just a dimple compared to the epic 75% breakdown since the European Bank peaked in 2007 competing with the Nasdaq collapse of 78% in 2001-2003. Nasdaq has more than recovered, while the European banks only collide from hopeless to hope and back to hopeless:

The market clearly sees that these European banks are a mess that will remain a mess and have a wonderful chance to become a lot of messier.

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