• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

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 .

---

European Financial CDS  Almost all European bank swaps tightened last week. Most of the 31 swaps that tightened did so by a notable amount. On average, Belgian swaps tightened by 15 bps, German by 6 bps, Greek by 31 bps, Italian by 7 bps, Portuguese by 11 bps, and Russian by 26. Only Hannover Rueckversicherung, National Bank of Greece, and DNB widened, and by just 1, 3, and 2 bps, respectively.  

European Banking Monitor: CDS Continues to Tighten - chart 1 euro cds

Sovereign CDS – Sovereign swaps mostly tightened over last week. Portuguese sovereign swaps tightened by -8.6% (-14 bps to 153 ) and US sovereign swaps tightened by -3.4% (1 bps to 17).

European Banking Monitor: CDS Continues to Tighten - chart 2 sovereign cds

European Banking Monitor: CDS Continues to Tighten - chart 3 sovereign cds

European Banking Monitor: CDS Continues to Tighten - 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 1 bps to 17 bps.

European Banking Monitor: CDS Continues to Tighten - chart 5 euribor ois spread

Matthew Hedrick

Associate

Ben Ryan

Analyst