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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 were mixed in Europe last week, but little changed overall. We've been keeping a close eye on Sberbank as our proxy for overall geopolitical risk. After rising steadily for several weeks, it cooled off notably this past week dropping 65 bps w/w to 315 bps. 

European Banking Monitor: Financials CDS Holds Flat on the Week After Widening  - chart1 Financials CDS

Sovereign CDS – Sovereign swaps were little changed on the week with most countries moving 0-1 bps. Portugal and Japan were the outliers at +3 bps each. 

European Banking Monitor: Financials CDS Holds Flat on the Week After Widening  - chart2 sovereign cds

European Banking Monitor: Financials CDS Holds Flat on the Week After Widening  - chart3 sovereign CDS

European Banking Monitor: Financials CDS Holds Flat on the Week After Widening  - 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 2 bps to 11 bps.

European Banking Monitor: Financials CDS Holds Flat on the Week After Widening  - chart5 Euribor OIS Spread

Matthew Hedrick

Associate

Ben Ryan

Analyst