Well, either the market is really spooked, or traders have got little else to do except gossip. But unsubstantiated rumours swept trading rooms yesterday that Deutsche Bank had suffered trading losses in fixed income, which, so it is said, will adversely effect the bank's second quarter trading performance.
This speculation is, at best, somewhat vague. The rumours are that Deutsche has taken a bashing on trading in collateralised debt obligation instruments, or possibly from losses in connection with proprietary positions the bank's traders are said to have taken on bonds in US carmaker General Motors. Reuters has quoted an unnamed hedge fund manager who is said to be close to Deutsche's prop traders. He said that 'these are the sort of guys who take big risks'.
Another idle piece of gossip doing the rounds is that Deutsche has some kind of big exposure to an unnamed US hedge fund, which is said to be on the verge of collapse. Speculation about a big hedge fund scandal or collapse has been circulating for some weeks now and the market is rife with rumour. Deutsche's CFO Clemens Boersig is reported to have said Wednesday, however, that the investment bank has no principal investments in hedge funds.
Unsurprisingly, Deutsche's shares fell 3% Tuesday.