European Banking Monitor: Swaps Move Slightly Lower on the Week

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 - Greek bank swaps continued to dive last week, falling an average of 70 bps on the week and dropping by an average of 116 bps on the month. Outside of Greece, European banks swaps were tighter by ~2 bps w/w and 16 bps m/m. 

 

European Banking Monitor: Swaps Move Slightly Lower on the Week - financials CDS

 

Sovereign CDS – Sovereign swaps tightened across the board last week with the sole exception of the US. Irish sovereign swaps tightened by -13.5% (-6 bps to 41 ). Meanwhile, US sovereign swaps widened by 1 bps to 17.

 

European Banking Monitor: Swaps Move Slightly Lower on the Week - chart 2 sovereign CDS

 

European Banking Monitor: Swaps Move Slightly Lower on the Week - chart 3 sovereign CDS

 

European Banking Monitor: Swaps Move Slightly Lower on the Week - chart 4 soevereign 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 tightened by 1 bps to 20 bps.

 

European Banking Monitor: Swaps Move Slightly Lower on the Week - chart 5 sovereign CDS

 

 

Matthew Hedrick 

Associate

 

Ben Ryan

Analyst


 

 

 


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