Growing market concerns about both the sustainability of sovereign debt levels, particularly in Europe and the interdependency of European banks and sovereigns, has driven a surge in global credit default swap (CDS) market liquidity over the past two weeks, according to Fitch Solutions, a division of the Fitch Group.

Jonathan Di Giambattista, MD of Fitch Solutions in New York, said: “The CDS market appears to have reached a consensus that the risk premium for some European financial institutions now needs to be priced higher. This has resulted in several big moves in CDS spreads and liquidity scores since the start of the year.

“The fact that the CDS market is now scrutinising some better known European banking names is reflective of the degree to which the market considers government support when assessing a bank’s risk of potential default.”

The biggest European banking movers, according to the monthly increase in their global CDS percentile ranking are (in descending order): Banco Bilbao Vizcaya Argentaria, Intesa Sanpaolo, UBS, BNP Paribas, Banco Comercial Portugues, Credit Suisse, Commerzbank, Societe Generale, Banco Espirito Santo and Banco Santander.

Fitch Solutions said that North American CDS are now following the trend set in Europe, with Fitch’s North American CDS liquidity index also now more liquid than levels seen during the time of the Lehman Brothers failure.

Fitch Solutions focuses on the development of fixed-income products and services, bringing to market a range of data, analytical tools and related services.