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Takeaway: Bank swaps continue their march lower.

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: Broad-based improvement in Europe on the week, inline with Asia and USA.

* Euribor-OIS: Had been quietly moving higher, seems to have stabilized in the 11-13 bps range, and is signaling an ongoing stabilization in the interbank risk market.

* 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.

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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 – Swaps tightened broadly in Europe last week as 35 of the 37 reference entities we track showed improvement. French, German, Italian, and Spanish bank swaps all showed decent WoW improvement. 

European Banking Monitor: More Green than Red This Week  - 55. banks

Euribor-OIS spread – The Euribor-OIS spread tightened by less than 1 bp to 12 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: More Green than Red This Week  - 55. 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: More Green than Red This Week  - 55. facility