Increased risk

European banks are suffering increased funding costs as a result of fears over Greek contagion. From the FT.

A key measure of bank risk, the overnight index swap spread on futures contracts in the eurozone, rose to a record high this week. This measures the premium over “risk-free” overnight rates of three-month rates, which carry greater credit risk.

Another warning sign is a significant shift to overnight lending by banks, particularly within troubled areas of the eurozone. Of the €450bn ($589bn) in daily turnover in the European money markets, 90 per cent is now in overnight lending, according to interdealer broker