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U.S. Banking Stress Indicator Could Worsen After Fed Hike

An indicator of credit risk may be showing signs of stress

An indicator of credit risk in the U.S. banking system may be showing signs of stress, as the Federal Reserve's aggressive rate hike path ratchets up expectations of economic pain.

The so-called FRA-OIS spread , which measures the gap between the U.S. three-month forward rate agreement and the overnight index swap rate, increased to 29.55 basis points on Thursday, its widest since May 23, according to data from Refinitiv. The measure was at -11.66 bps earlier in the week.

Widely viewed as a proxy for banking sector risk, a higher spread reflects rising interbank lending risk.

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