WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS



Financial Risk Monitor Summary (Across 3 Durations): Now positive across all three durations.

  • Short-term (WoW): Positive / 7 of 10 improved / 2 out of 10 worsened / 2 of 10 unchanged
  • Intermediate-term (MoM): Positive / 7 of 10 improved / 1 of 10 worsened / 3 of 10 unchanged
  • Long-term (150 DMA): Positive / 5 of 10 improved / 4 of 10 worsened / 1 of 10 unchanged / 1 of 10 n/a

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - summary

 

1. US Financials CDS Monitor – Swaps were mostly tighter across domestic financials, tightening for 23 of the 28 reference entities and widening for 5.  Tightening was strongest among the moneycenter banks, while the mortgage insurers saw widening swaps. 

Tightened the most vs last week: JPM, BAC, WFC

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

Tightened the most vs last month: C, WFC, COF

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

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - us cds

 

2. European Financials CDS Monitor – Banks swaps in Europe followed a similar pattern, widening for 34 of the 39 reference entities.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - euro cds

 

3. Sovereign CDS – Sovereign CDS fell sharply across Europe, falling 48 bps on average last week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - sov cds

 

4. High Yield (YTM) Monitor – High Yield rates fell 8 bps last week, closing at 7.85 on Friday.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index continued to ascend, closing at 1616, 4 points higher than the previous week.   

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - lev loan

 

6. TED Spread Monitor – The TED spread fell slightly last week, ending the week at 15.9 versus 16.4 the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - ted spread

 

7. Journal of Commerce Commodity Price Index – Last week, the index rose 3 points, closing at 36.2 on Friday.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields fell 51 bps.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE 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 fell early in the week before rebounding somewhat to close at 178, 15.5 bps below the previous Friday’s close.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - 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.  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.  Last week was no exception, as the index fell a further 94 points to end the week at 1043.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - baltic dry

 

11. 2-10 Spread – We track the 2-10 spread as a proxy for bank margins.  Last week the 2-10 spread widened 10 bps to 288 bps. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - 2 10

 

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 1.2% upside to TRADE resistance, 0.6% downside to TRADE support. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: NOW POSITIVE ACROSS ALL THREE DURATIONS - XLF

 

 

Joshua Steiner, CFA

 

Allison Kaptur


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