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Takeaway: International risk remains high as Greece's elections later this month and Russia's ongoing woes couple with steady far-East press

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 widened in Europe last week.  Investors continue to focus on the uncertainty of upcoming Greek elections; Greek banks' CDS widened between 159 and 229 bps last week.

European Banking Monitor: Grexit Fears Priced Into Financials Swaps - chart1 FInancials CDS

Sovereign CDS – European Sovereign Swaps mostly tightened over last week. German sovereign swaps tightened by -21.3% (-4 bps to 14 ) and Portuguese sovereign swaps widened by 7.8% (14 bps to 187).

European Banking Monitor: Grexit Fears Priced Into Financials Swaps - chart2 sovereign CDS

European Banking Monitor: Grexit Fears Priced Into Financials Swaps - chart3 sovereingn CDS

European Banking Monitor: Grexit Fears Priced Into Financials 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 widened by 1 bps to 10 bps.

European Banking Monitor: Grexit Fears Priced Into Financials Swaps - chart5 euribor ois

Matthew Hedrick

Associate

Ben Ryan

Analyst