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A Bottomless Pit?

07 September 2018 by lberuti

It was another day of grind tighter for financial credit indices. Itraxx Financial Senior (ITXES) and iTraxx Financial Subordinated (ITXEU) both closed 1bps tighter at 76bps and 161bps respectively. It took place despite an oversized move wider in the 5-year risk premium of DANBNK ( Danske Bank A/S ). It came under fresh pressure today after the Wall Street Journal reported an investigation into the money laundering scandal at its Estonian branch between 2007 and 2015 involved $150Bln worth of transactions. On Tuesday, the Financial Times cited the bank’s own investigation as saying the Danish bank handled up to $30Bln of Russian and ex-Soviet money through non-resident accounts via its Estonian branch in 2013 alone. Back then, DANBNK’s hardly reacted to the headline. Even though the bank said its investigators had not determined whether all of the $150Bln should be deemed suspicious, it also admitted that “as we have previously communicated, it is clear that the issue related to the portfolio (are) bigger than we previously anticipated”. That was enough to send 5-year CDS referencing its senior debt 15bps wider at 64bps and CDS referencing its subordinated debt 59bps wider at 175bps.