WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN

This week's notable callouts include US municipal swaps tightening significantly, while European Sovereign swaps widened once again.

 

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 3 of 10 improved / 6 out of 10 worsened / 2 of 10 unchanged
  • Intermediate-term (MoM): Positive / 4 of 10 improved / 2 of 10 worsened / 5 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: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - summary

 

1. US Financials CDS Monitor – Swaps were mostly tighter across domestic financials, tightening for 20 of the 28 reference entities and widening for 8. 

Tightened the most vs last week: MTG, XL, MBI

Widened the most vs last week: AXP, MET, ALL

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

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

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - us cds

 

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

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - euro cds

 

3. Sovereign CDS – Sovereign CDS rose across Europe, climbing 25 bps on average last week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - sov cds

 

4. High Yield (YTM) Monitor – High Yield rates fell early in the week before backing up on Friday to close at 7.84, 1 bps lower than the previous week.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index continued to ascend, closing at 1619, 3 points higher than the previous week.   

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - lev loan

 

6. TED Spread Monitor – The TED spread backed up last week, ending the week at 17.8 versus 15.9 the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - ted spread

 

7. Journal of Commerce Commodity Price Index – Last week, the index fell 1.5 points, closing at 34.7 on Friday.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose 57 bps in a steady trend, erasing the prior week’s improvement.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - 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 last week, closing at 169 on Friday, the lowest level since last November.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - 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.  With Australian floods and oversupply pressuring the Index, it has fallen 30% so far this year and is down 60% from its most recent peak. Last week the Index had its first up week in months, rising 135 to 1178. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - bdi

 

11. 2-10 Spread – We track the 2-10 spread as a proxy for bank margins.  Last week the 2-10 spread tightened 10 bps to 279 bps. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - 2 10

 

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 0.2% upside to TRADE resistance, -1.6% downside to TRADE support. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNI SWAPS TIGHTEN WHILE SOVEREIGN SWAPS WIDEN - XLF

 

 

Joshua Steiner, CFA

 

Allison Kaptur


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more