• 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 - European bank swaps tightened aggressively last week on the heels of the ECB's decision to crank additional stimulus in the Eurozone. The average move was -17 bps (median -10 bps) and was led (again) by Greek banks, which dropped by an average of 82 bps w/w.

European Banking Monitor: Swaps Tighten Substantially On ECB Rate Decision   - chart 1 CDS

Sovereign CDS – Sovereign swaps tightened around the globe last week. Italy, Portugal, and Spain all compressed by 17-21 bps. The US and Germany were both tighter by one basis point to 16 and 20 bps, respectively. 

European Banking Monitor: Swaps Tighten Substantially On ECB Rate Decision   - chart2 sovereign CDS

European Banking Monitor: Swaps Tighten Substantially On ECB Rate Decision   - chart 3 sovereign CDS

European Banking Monitor: Swaps Tighten Substantially On ECB Rate Decision   - 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 was unchanged at 20 bps w/w.

European Banking Monitor: Swaps Tighten Substantially On ECB Rate Decision   - chart 5 euribor ois spread

Matthew Hedrick

Associate

Ben Ryan

Analyst