Some of these big banks might be “too big to fail”, but the cost of insuring them against credit default are soaring today. Morgan Stanley’s ($MS) 5-year CDS spread is up 13% to 332 basis points, Goldman ($GS) up 13% to 243 bp, Citi ($C) up 10% to 237 bp, and J.P. Morgan Chase ($JPM) is up 8% to 130 bp.
Bank of America ($BAC) stock is selling off hard today back to pre-buffett-investment levels. The CDS Spreads are ripping higher.
Bank of America’s five-year CDS spread is 13% wider this morning, to a bid of 360 basis points, according to Markit data. That had dipped well below 300 shortly after the Warren Buffett rescue, but most traces of that intervention are gone now. The record-high close was about 390, back in early 2009, and it approached that high just ahead of Mr. Buffett’s rescue last month.
Here is the Bank of America 5-year CDS spread (bid and ask):
Mark Gongloff at the Wall Street Journal looks on the bright side noting that it might be a head and shoulders pattern!