WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Neutral / 2 of 10 improved / 2 out of 10 worsened / 7 of 10 unchanged
  • Intermediate-term (MoM): Positive / 7 of 10 improved / 1 of 10 worsened / 3 of 10 unchanged
  • Long-term (150 DMA): Positive / 4 of 10 improved / 3 of 10 worsened / 3 of 10 unchanged / 1 of 10 n/a

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - summary

1. US Financials CDS Monitor – Swaps were mixed across domestic financials, tightening for 17 of the 28 reference entities and widening for 11.    

Widened the most vs last week: MTG, MBI, AGO

Tightened the most vs last week: CB, XL, AIG

Widened the most vs last month: MTG, PMI, RDN

Tightened the most vs last month: LNC, MET, HIG

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - us cds

2. European Financials CDS Monitor – Banks swaps in Europe were also mixed, tightening for 19 of the 39 reference entities and widening for 20.

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - euro cds

3. Sovereign CDS – Sovereign CDS rose 14 bps on average last week, reversing their sharp decline of the last several weeks. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - sov cds

4. High Yield (YTM) Monitor – High Yield rates held close to flat last week, closing at 7.93 on Friday.  

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - high yield

5. Leveraged Loan Index Monitor – The Leveraged Loan Index showed no sign of slowing its ascent, closing at 1612, 8 points higher than the previous week.   

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - lev loan index

6. TED Spread Monitor – The TED spread rose slightly last week, ending the week at 16.4 versus 15.3 the prior week.

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - ted spread

7. Journal of Commerce Commodity Price Index – Last week, the index held flat, closing at 33.2 on Friday.

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - JOC

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose 16 bps.

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - 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 fell early in the week before rebounding somewhat to close at 193, 5 bps below the previous Friday’s close.  

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - markti

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.  While Australian floods and oversupply have been pressuring the Index, it has fallen 33% so far this year and is down 60% from its most recent peak.    

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - BDI

11. 2-10 Spread – We track the 2-10 spread as a proxy for bank margins.  Last week the 2-10 spread narrowed just slightly to 278 bps. 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - 2 10 spread

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 1% upside to TRADE resistance, 0.4% downside to TRADE support. 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGED WEEK OVER WEEK IN SPITE OF EGYPT - XLF

Joshua Steiner, CFA

Allison Kaptur