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 .
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European Financial CDS - European banks posted a rare week of widening, but only nominally so. The average change was +2 bps. Spanish and Italian banks showed the largest increases, though those increases were still relatively modest at 10-11 bps. Improvements came from Greek and Belgian banks, where swaps continued to tighten.
Sovereign CDS – Portuguese sovereign swaps widened 14 bps last week, but it was the exception. Elsewhere, swaps either tightened or went unchanged. The largest improvements came from the US and Japan, tightening 6 and 4 bps, respectively.
Euribor-OIS Spread – The Euribor-OIS spread was unchanged at 11 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.
Matthew Hedrick
Associate
