• It's Here!

    Etf Pro

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

  • It's Here

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

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:

* European Sovereign CDS mostly widened along with European Bank CDS. French and German banks widened across the board.  

 If you’d like to discuss recent developments in Europe, from the political to financial to social, please let me know and we can set up a call.

Matthew Hedrick

Senior Analyst

(o)

-------------

European Financials CDS Monitor – Bank swaps were wider in Europe last week for 26 of the 39 reference entities we track. The median widening was 7 bps.  

European Banking Monitor: French and German Bank Risk Widens - aa. banks

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 widened by 1 bps to 40 bps.

European Banking Monitor: French and German Bank Risk Widens - aa. 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.  The latest overnight reading is €784.97B.

European Banking Monitor: French and German Bank Risk Widens - aa. ecb facility

Security Market Program – For a twelfth straight week the ECB's secondary sovereign bond purchasing program, the Securities Market Program (SMP), purchased no sovereign paper for the latest week ended 6/1, to take the total program to €212 Billion.

European Banking Monitor: French and German Bank Risk Widens - aa. SMP

Matthew Hedrick

Senior Analyst