• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .


Key Takeaways:

 

* The Euribor-OIS fell 1 bps to 41bps while the TED spread remained roughly flat. These measures of interbank risk are flattening out. We expect to see very little improvement from here.     

*The ECB’s Liquidity Recourse to the Deposit Facility remains sticky near all-time highs.

 

 

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 risk. The Euribor-OIS spread tightened by 1 bps to 41 bps over last week.

European Banking Monitor: Risk Trickles Back - 11. euribor

ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

European Banking Monitor: Risk Trickles Back - 11. ECB liq

European Financials CDS Monitor –  Due to technical difficulties this week we were unable to pull swap rates for the European banks.

Security Market Program – Due to the Easter Monday holiday today, the ECB has not released its SMP sovereign purchases for the week ended 4/6.  We wouldn’t be surprised to see a fourth straight week of zero buying. We’ll update you as the data comes through.

Matthew Hedrick

Senior Analyst