Euro Banks, Geopolitical Turmoil Drives Spreads

The sovereign credit default swaps market exhibited the now ubiquitous volatility this week, with the Markit SovX Western Europe index reaching a wide level of 152bp on May 25. But the news flow surrounding eurozone sovereigns was unusually light, and spread direction was instead determined largely by fresh geopolitical turmoil, the plummeting euro and the fragile European banking system.