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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 - Swaps mostly tightened in Europe last week as 25 banks saw swaps tighten vs just 11 that widened. Conspicuous moves came from Banco Espirito Santo in Portugal (+55 bps w/w to 385 bps) and Sberbank of Russia (+9 bps w/w to 340 bps). 

European Banking Monitor: Sovereign CDS Flat, Financials CDS Mostly Tighter - chart1 Financials CDSvf

Sovereign CDS – Sovereign swaps were largely unchanged last week. Italy and Spain tightened by 1 and 4 bps, respectively, while the US, France and Portugal widened by 1, 2 and 4 bps. 

European Banking Monitor: Sovereign CDS Flat, Financials CDS Mostly Tighter - chart2 sovereign CDS

European Banking Monitor: Sovereign CDS Flat, Financials CDS Mostly Tighter - chart3 sovereign CDS

European Banking Monitor: Sovereign CDS Flat, Financials CDS Mostly Tighter - chart4 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 tightened by 1 bps to 13 bps.

European Banking Monitor: Sovereign CDS Flat, Financials CDS Mostly Tighter - chart5 euribor OIS Spread

Matthew Hedrick

Associate

Ben Ryan

Analyst