Deutsche Bank Stock Forecast: DB shares drop 6% at open following bond sell-off

Deutsche Bank (DB) is the newest bank that has the market worried. Shares opened down more than 6% on Friday and at the time of writing are trading off -6.8% at $8.99. It could be worse as Deutsche Bank's bonds rallied in Friday 's premarket after the premier German investment bank said it would repay one particular bond early.

Deutsche Bank stock news: Credit Suisse situation still rattling European banks

In the aftermath of the government-backed takeover of Credit Suisse by UBS one week ago, when the Swiss National Bank zeroed out $17.3 billion worth of AT-1 bonds, bonds owned by other European banks have been losing value. Tier-2 bonds from Deutsche Bank initially sold off to 90% of their face value following the Credit Suisse debacle but were still trading for about 94% this morning. Then Deutsche Bank announced it would buy them back early, which prompted other issuances by the bank to increase in value.

Deutsche Bank stock had been trading down as much as 12% in the premarket before the announcement. Likewise, Five-year credit default swaps on Deutsche's bonds rose from 203 basis points to 220 basis points before the announcement.

Deutsche Bank executives and other large corporate lenders in Europe have emphasized their diverse depositor base after Silicon Valley Bank and Signature Bank in the US both collapsed in light of bank runs. Worries persist though that lending will begin to tighten following the wipeout of Credit Suisse's AT-1 bonds. 

News in the US has also pushed investors to abandon banks after US Treasury Secretary Janet Yellen said she did not foresee insuring all bank deposits despite rescuing depositors at both Silicon Valley and Signature banks. First Republic Bank (FRC) stock fell 40% this past week, and other banks like PacWest (PACW) have also renewed anxiety. On Thursday the market was also surprised that the Fed's overnight window lent the US banking system $163.9B this week, which was almost as much as it did the previous week.

Deutsche Bank stock forecast

Breaking through the $9.35 support level seen during last August and September's double top formation means that Deutsche Bank stock is likely headed for the mid-$7 range. That demand zone held up in the latter of 2022 between $7.25 and $7.66. There is minimal support at $8, but the lower range provides much stronger historical support as it witnessed much more volume months apart. If, however, DB stock breaks back above $9.35, then the stock would appear to be in an uptrend. Bulls entering here will want to make sure there are at least two closes above that level before getting in themselves.

DB daily chart