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:
* Bank swaps domestically and in Europe saw significant widening week-over-week as economic uncertainty trumped monetary stimulus relief once again. Sovereign swaps followed suit mostly rising week-over-week. French, Italian, Spanish, and Portuguese sovereign swaps were all wider while Germany and Ireland saw their sovereign swaps tighten.
On OMTs Reporting: The ECB has stated that Aggregate Outright Monetary Transaction holdings and their market values will be published on a weekly basis and the average duration of Outright Monetary Transaction holdings and the breakdown by country will take place on a monthly basis. There is no indication that the OMTs has been initiated.
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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
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European Financials CDS Monitor – French, German, Italian, Spanish and UK bank swaps all widened last week.
Euribor-OIS spread – The Euribor-OIS spread tightened by 1 bps to 15 bps, and is now back at its tightest levels in the last five years. 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.
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.
