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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

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - summary

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

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - us cds

2. European Financials CDS Monitor – In Europe, banks swaps blew out ahead of the Irish bailout.  Swaps increased for all 39 reference entities.  

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - europe cds

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.   

 

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - sov cds

4. High Yield (YTM) Monitor – High Yield rates rose last week, closing at 8.44 on Friday.  

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - high yield

5. Leveraged Loan Index Monitor – The leveraged loan index put in its third consecutive down week, falling 2 points versus the previous Friday.   

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - lev loan

6. TED Spread Monitor – Last week the TED spread fell slightly, closing at 14.2 bps.

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - ted spread

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.

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - joc

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.

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - greek bonds

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.     

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - markit

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.  

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - Baltic dry

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. 

WEEKLY FINANCIALS RISK MONITOR: STILL NEGATIVE ACROSS ALL THREE DURATIONS - XLF

Joshua Steiner, CFA

Allison Kaptur