Financial Risk Monitor Summary (Across 3 Durations):
- Short-term (WoW): Negative / 0 of 10 improved / 6 of 10 worsened / 4 of 10 unchanged
- Intermediate-term (MoM): Positive / 2 of 10 improved / 5 of 10 worsened / 3 of 10 unchanged
- Long-term (150 DMA): Negative / 0 of 10 improved / 6 of 10 worsened / 3 of 10 unchanged / 1 of 10 n/a
1. US Financials CDS Monitor – Swaps were mixed to negative in the US last week, widening for 23 of the 29 reference entities and tightening for 6.
Tightened the most vs last week: C, WFC, COF
Widened the most vs last week: CB, TRV, MBI
Tightened the most vs last month: AXP, COF, SLM
Widened the most vs last month: PMI, MBI, AGO
2. European Financials CDS Monitor – In Europe, the pattern was more positive for bank swaps. Swaps widened for 13 of the 39 reference entities and tightened for 26.
3. Sovereign CDS – Sovereign CDS rose 7 bps on average last week. Ireland and Portugal improved substantially, while Greece continued to worsen, pushing back above its August highs.
4. High Yield (YTM) Monitor – High Yield rates rose sharply early last week, closing at 8.18 on Friday.
5. Leveraged Loan Index Monitor – The leveraged loan index put in its second consecutive down week, falling 5 points versus the previous Friday.
6. TED Spread Monitor – Last week the TED spread fell slightly, closing at 15.5 bps.
7. Journal of Commerce Commodity Price Index – Last week, the index fell 8 points, closing at 18.9.
8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds. Last week yields held close to flat, ending the week 17 bps above last week’s close.
9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices. Spreads closed the week at 182 bps.
10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production. Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion. Last week the index fell 16 points, closing at 215 versus 231 the prior week.
11. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 0.8% upside to TRADE resistance, 0.3% downside to TRADE support, 2.25% downside to TREND support.
Joshua Steiner, CFA