The signs are everywhere – if you choose to look – Europe's banking system is collapsing (no matter what Draghi has to offer). From record lows in Deutsche Bank and Credit Suisse to spiking default risk in Monte Paschi, the panic in Europe's funding markets (basis swaps collapsing) is palpable.
Tumbling to a fresh post-Brexit low, Europe's Stoxx 600 Bank Index is testing EU crisis lows…
With Credit Suisse smashing to record lows…
and Deustche Bank crashing towards the inevitable Lehman moment…
Senior and Sub CDS are widening dramatically today with Italy's short-sale ban on Monte Paschi shares sparking a 10% bounce in the stock but CDS are unchanged implying a 66% chance of default.
Which helps explain the crisis in Europe's funding markets as USD demand smashes higher (-9bps to -49bps in EUR-USD basis swaps)…
With counterparty risk concerns growing in Sterling banks…
Charts: Bloomberg
via http://ift.tt/29xiPss Tyler Durden