European Banking Monitor

No Positions in Europe 

 

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor"

 

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Euribor-OIS spread The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty. The Euribor-OIS spread tightened by 5 bps to 89 bps.

 

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ECB Liquidity Recourse to the Deposit Facility The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  The ECB pays lower rates than the market, so an increase in this metric demonstrates increased perceived counterparty risk and liquidity hoarding.  The ECB said banks deposited €501.9 Billion overnight, a new record high. 

 

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European Financials CDS Monitor – Bank swaps were tighter in Europe last week for 39 of the 40 reference entities. The average tightening was -6.7% and the median tightening was -9.9%.

 

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Security Market Program – The ECB's secondary sovereign bond purchasing program bought €3.766 Billion in the week ended 1/12 versus €1.104 Billion in the week ended 1/6 to take the total program to €217.0 Billion.

 

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Matthew Hedrick

Senior Analyst


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