At Bespoke Premium, we created an index that measures default risk for the global financial sector based on CDS prices for a number of banks and brokers. We highlight this index on a regular basis so members can keep a close eye on the numbers, which are very important to follow in the current market environment.
Below we highlight a table of the current CDS prices for a number of global banks and brokers along with the recent change in their stock prices. The CDS prices represent the cost per year to insure $10,000 worth of debt for five years (or 10,000 euros for European firms). As shown, default risk for Citi (C) and Bank of America (BAC) are up by far the most year to date at +200%. Not surprisingly, their stock prices are also down the most. American Express (AXP) and Wells Fargo (WFC) have had the 3rd and 4th biggest spikes in default risk at around 140%. However, AXP is down much less than Citi, BAC, and WFC this year.
On the positive side (if you can call it that), Deutsche Bank (DB), Goldman Sachs (GS), and Morgan Stanley (MS) have seen the smallest rise in default risk in 2009, with Morgan Stanley rising the least at 14.57%. Morgan Stanley is also the only company on the list whose stock price is up this year (7.11%).
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