WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Neutral / 3 of 10 improved / 3 out of 10 worsened / 4 of 10 unchanged
  • Intermediate-term (MoM): Negative / 1 of 10 improved / 7 of 10 worsened / 2 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 RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - summary

1. US Financials CDS Monitor – Swaps were mixed across domestic financials last week, widening for just 9 of the 28 reference entities and tightening for the other 19.

Tightened the most vs last week: BAC, PRU, GNW

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

Tightened the most vs last month: SLM, PRU, GNW

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

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - US cds

2. European Financials CDS Monitor – In Europe, banks swaps were similarly mixed.  Swaps widened for 20 of the 39 reference entities.

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - euro cds

 

3. Sovereign CDS – Sovereign CDS rose less than one basis point on average last week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - sov CDS

4. High Yield (YTM) Monitor – High Yield rates rose very slightly last week, closing at 8.39 on Friday.  

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - high yield

5. Leveraged Loan Index Monitor – The Leveraged Loan Index hit a new high, rising 8 points to close at 1564.   

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - levered loan

6. TED Spread Monitor – The TED spread backed up late in the week to close at 20.2.

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - ted spread

7. Journal of Commerce Commodity Price Index – Last week, the index fell half a point, closing at 25.1 on Friday.

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - JOC

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose slightly, ending the week 22 bps above the prior week’s close.

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - greek bond yields

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 195 bps, 13 bps lower than last week.     

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - 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 10 points to close at 200.   

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - baltic dry index

11. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 1.9% upside to TRADE resistance, 2.4% downside to TRADE support. 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - XLF

Joshua Steiner, CFA

Allison Kaptur