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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 - All European swaps, with the exception of the Greek banks and three Swedish banks, tightened over the past week. Most of the 31 swaps that tightened did so by a notable amount. On average, French swaps tightened by 7 bps, German by 8 bps, Italian  by 9 bps, Portuguese by 14 bps, Scottish by 16 bps, Spanish by 9 bps, and UK by 6 bps. In contrast to the past couple of weeks, Greek banks widened considerably w/w, by an average of 48 bps. The widening of Swedish banks was nominal, with three banks widening by 1 bps each, and the fourth tightening by 1 bps. 

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 1 financials cds

Sovereign CDS – Sovereign swaps mostly tightened over last week. Italian sovereign swaps tightened by -3.9% (-4 bps to 111 ) and American sovereign swaps widened by 0.7%.

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 2 sovereign cds

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 3 sovereign cds

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 4 sovereign cds

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 2 bps to 16 bps.

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 5 euribor ois spread

Matthew Hedrick

Associate

Ben Ryan

Analyst