Financial Risk Monitor Summary (Across 3 Durations):
- Short-term (WoW): Negative / 0 of 10 improved / 5 of 10 worsened / 5 of 10 unchanged
- Intermediate-term (MoM): Positive / 1 of 10 improved / 7 of 10 worsened / 1 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 increased across domestic financials last week. Only PMI saw swaps come in; spreads increased for the other 28 reference entities.
Tightened the most vs last week/widened the least: PMI, MTG, JPM
Widened the most vs last week: GS, COF, MBI
Tightened the most vs last month: SLM, MTG, RDN
Widened the most vs last month: CB, TRV, MBI
2. European Financials CDS Monitor – In Europe, banks swaps blew out ahead of the Irish bailout. Swaps increased for all 39 reference entities.
3. Sovereign CDS – Sovereign CDS rose 47 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 last week, closing at 8.44 on Friday.
5. Leveraged Loan Index Monitor – The leveraged loan index put in its third consecutive down week, falling 2 points versus the previous Friday.
6. TED Spread Monitor – Last week the TED spread fell slightly, closing at 14.2 bps.
7. Journal of Commerce Commodity Price Index – Last week, the index fell 4.5 points, closing at 14.4 on Wednesday, the last day for which pricing was available.
8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds. Last week yields continued to rise, ending the week 21 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 181 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 rose slightly, closing at 217 versus 215 the prior week.
11. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 1.9% upside to TRADE resistance, 0.7% downside to TRADE support.
Joshua Steiner, CFA
Allison Kaptur
