WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT

This week's notable callouts include swaps widening across US and European financials and European sovereigns, while the TED spread widened to the highest level since August.  On the positive side, US Municipal swaps hit a new low.  


Financial Risk Monitor Summary (Across 3 Durations):

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

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - summary

 

1. US Financials CDS Monitor – Swaps were mostly wider across domestic financials, widening for 21 of the 28 reference entities and tightening for 7. 

Tightened the most vs last week: WFC, UNM, MMC

Widened the most vs last week: MET, XL, AIG

Tightened the most vs last month: COF, UNM, MMC

Widened the most vs last month: MET, XL, HIG

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - US CDS

 

2. European Financials CDS Monitor – Banks swaps in Europe were mostly wider, widening for 32 of the 39 reference entities and tightening for 7.

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - european CDS

 

3. Sovereign CDS – Sovereign CDS widened across Europe, rising 23 bps on average last week as Greece approached a new YTD high. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - sov cds

 

4. High Yield (YTM) Monitor – High Yield rates fell slightly last week, ending at 7.79, 3 bps lower than the previous week.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index fell every day last week to end the week at 1605. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - lev loan

 

6. TED Spread Monitor – The TED spread hit the highest level since last August, ending the week at 23.2 versus 19.2 the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - ted

 

7. Journal of Commerce Commodity Price Index – Last week, the JOC index hit a high and then backed off sharply, falling 6.5 points to end the week at 28.6.

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose 56 bps.

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - 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 140 on Friday after hitting a new low intraweek.

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - 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.  Early in the year, Australian floods and oversupply pressured the Index, driving it down 30%. Since then it has bounced off the lows and is now steadily climbing.  Last week it rose 216 points to 1346. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - Baltic dry

 

11. 2-10 Spread – We track the 2-10 spread as a proxy for bank margins.  Last week the 2-10 spread tightened slightly to 276 bps. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - 2 10

 

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows:  1.3% upside to TRADE resistance, 1.6% downside to TRADE support.

 

WEEKLY RISK MONITOR FOR FINANCIALS: TED SPREAD AND SWAPS WIDEN OUT - XLF

 

 

Joshua Steiner, CFA

 

Allison Kaptur


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

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