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    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 2 of 10 improved / 5 out of 10 worsened / 3 of 10 unchanged
  • Intermediate-term (MoM): Negative / 0 of 10 improved / 6 of 10 worsened / 4 of 10 unchanged
  • Long-term (150 DMA): Negative / 1 of 10 improved / 5 of 10 worsened / 3 of 10 unchanged / 1 of 10 n/a

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - summary

1. US Financials CDS Monitor – Swaps continued to tighten across domestic financials last week, widening for just 5 of the 28 reference entities and tightening for the other 23.

Tightened the most vs last week: C, SLM, PRU

Widened the most vs last week: ALL, CB, TRV

Tightened the most vs last month: JPM, C, PRU

Widened the most vs last month: CB, TRV, MBI

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - US cds

2. European Financials CDS Monitor – In Europe, banks swaps reversed course and widened out.  Swaps widened for 32 of the 39 reference entities.

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - euro cds

3. Sovereign CDS – Sovereign CDS rose 27 bps on average last week.

 

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - sov cds

4. High Yield (YTM) Monitor – High Yield rates rose slightly last week, closing at 8.31 on Friday.  

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - high yield

5. Leveraged Loan Index Monitor – The Leveraged Loan Index came close to new highs, closing at 1556.   

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - lev loan

6. TED Spread Monitor – The TED spread backed up on Friday to close the week at 18.5.

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - ted spread

7. Journal of Commerce Commodity Price Index – Last week, the index rose 3.8 points, closing at 25.7 on Friday.

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - JOC

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose slightly, ending the week 12 bps above the prior week’s close.

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - 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 increased sharply last week, closing at 208 bps, 35 bps higher than last week.     

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - markit mcdx

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 7.3 points to close at 209.5.   

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - baltic dry

11. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 1.2% upside to TRADE resistance, 3.6% downside to TRADE support. Typically, when downside to upside is greater than 2:1, we believe caution is warranted.  

WEEKLY FINANCIALS RISK MONITOR: MUNI SWAPS BACK UP SHARPLY - XLF

Joshua Steiner, CFA

Allison Kaptur