• It's Coming...

    Etf Pro

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

European Banking Monitor: Financials CDS Wider 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 

--- 

European Financial CDS - Swaps mostly widened in Europe last week (28 of 38). The tide of short-term momentum around EU QE-Lite appears to be receding as swaps were down on average across the EU banks complex.

European Banking Monitor: Financials CDS Wider on the Week - chart1 financials cds

Sovereign CDS – Sovereign swaps continue to drop on a month-over-month basis. Irish sovereign swaps tightened by -3.9% (-2 bps to 50 ) and Spanish sovereign swaps widened by 7.8% (4 bps to 61).

European Banking Monitor: Financials CDS Wider on the Week - chart2 sovereign CDS

European Banking Monitor: Financials CDS Wider on the Week - chart3 sovereign CDS

European Banking Monitor: Financials CDS Wider on the Week - chart4 sovereign

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 3 bps to 14 bps.

European Banking Monitor: Financials CDS Wider on the Week - chart5 Euriobor OIS Spread

Matthew Hedrick

Associate

Ben Ryan

Analyst