Due to the European debt crisis, counterparty risk is increasing as banks are reluctant to lend to each other, which is remiscient of the bank freeze at the beginning of the fiancial crisis of 2008. The LIBOR-OIS spread which is a gauge of banks willingness to lend, widened 2 basis points today to a spread of 26. Despite the unveiling of the near one trillion dollar Stabilization Fund last week, it continues to drift higher. The spread has now increased 20 basis points from the most recent low achieved on March 15.
Saturday, May 22, 2010
Counter-Party Risk Increasing
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counter-party risk