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Takeaway: Globally, bank swaps tightened last week, while sovereign swaps widened. Euribor-OIS is continuing its slow, but steady, rise.

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 Bank CDS: In Europe, swaps were tighter in nearly all banks we track. 36 out of 37 bank swaps tightened. German and French banks saw considerable tightening along with banks from Spain and the U.K. Interestingly, Mario Monti, prime minister of Italy, resigned overnight. All in all, Monti's resignation came as a surprise and may increase uncertainty in Italy and in the Eurozone.   

* Euribor-OIS: The Euribor-OIS spread, a measure that gauges European counter party risk, rose 2 bps last week. 

* 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 to date.


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




European Financials CDS Monitor – European bank swaps posted an impressive rally last week with 36 out of the 37 reference entities we track tighter. Banks in France, Germany, Italy, the United Kingdom and Spain all were notably tighter. 

European Banking Monitor: Momentum Remains Broadly Positive  - 22. banks

Euribor-OIS spread – The Euribor-OIS spread widened by 2 bps to 14.2 bps. 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. 

European Banking Monitor: Momentum Remains Broadly Positive  - 22. 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: Momentum Remains Broadly Positive  - 22. facility