European Banking Monitor: Widening in Sovereign Swaps

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

 

European Banking Monitor: Widening in Sovereign Swaps - chart1 euro financials CDS

 

Sovereign CDS – European Sovereign Swaps mostly widened over last week. German sovereign swaps widened by 1.3% (0 bps to 20 ) and Portuguese sovereign swaps widened by 25.2% (42 bps to 211).

 

European Banking Monitor: Widening in Sovereign Swaps - chart2 sovereign CDS

 

European Banking Monitor: Widening in Sovereign Swaps - chart3 sovereign CDS

 

European Banking Monitor: Widening in Sovereign Swaps - 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 10 bps.

 

European Banking Monitor: Widening in Sovereign Swaps - chart5 euribor OIS spread

 

Matthew Hedrick 

Associate

 

Ben Ryan 

Analyst

 


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