Risk measures are currently neutral (intermediate term) to positive (short-term). The obvious flash point is Greece, which continues to play chicken with the EU. That said, while the probability of Greece's exit from the Eurozone continues to rise, the expected fallout from Grexit appears to continue to fall.
European Financial CDS - Swaps mostly tightened in Europe last week. However, with the continued absence of a deal for Greece's bailout, bank swaps in that country widened between 298 bps and 639 bps.
Sovereign CDS – Sovereign swaps mostly tightened over last week. Spanish and French sovereign swaps tightened the most, by -5 bps to 100 and -3 bps to 38, respectively.
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 10 bps.