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
European Financial CDS - Swaps mostly tightened in Europe last week. However, as has become commonplace, another week went by without a deal on Greece’s bailout, and CDS spreads in the country rose in excess of 100 bps.
Sovereign CDS – Sovereign Swaps were little changed last week. The median spread held constant at 43 bps. However, Italian, Spanish, and Portuguese swaps did tighten in a partial recovery from the previous week. The swaps tightened by 7 bps to 125, 7 bps to 93, and 12 bps to 149, 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 was unchanged at 10 bps.