WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK

This week's notable callouts include Greek bond yields continuing upward and commodity prices falling.


Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 3 of 11 improved / 2 out of 11 worsened / 6 of 11 unchanged
  • Intermediate-term (MoM): Neutral / 4 of 11 improved / 4 of 11 worsened / 3 of 11 unchanged
  • Long-term (150 DMA): Neutral / 4 of 11 improved / 4 of 11 worsened / 3 of 11 unchanged

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - summary

 

1. US Financials CDS Monitor – Swaps were mostly tighter across domestic financials, tightening for 25 of the 28 reference entities and widening for 3. 

Tightened the most vs last week: PMI, RDN, ALL

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

Tightened the most vs last month: ACE, ALL, AGO

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

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - us cds

 

2. European Financials CDS Monitor – Banks swaps in Europe were mostly tighter, tightening for 31 of the 39 reference entities and widening for 8.

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - euro cds

 

3. European Sovereign CDS – Greek CDS reversed their meteoric rise in the middle of last week, leading the overall average to flat for the week (down 2 bps).    

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - sov cds

 

4. High Yield (YTM) Monitor – High Yield rates fell last week, ending at 7.66 versus 7.78 the prior week.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose slightly last week to end the week at 1621.   

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - lev loan

 

6. TED Spread Monitor – The TED spread rose last week, ending the week at 23.8 versus 22.3 the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - ted spread

 

7. Journal of Commerce Commodity Price Index – Last week, the JOC index fell to end the week at 28.3, 3.8 points lower than the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields jumped a further 76 bps despite the mid-week pullback.

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - 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 six 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. We track the 14-V1.  Last week spreads fell to 112 from 123. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - 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.  Early in the year, Australian floods and oversupply pressured the Index, driving it down 30% before bouncing off the lows.  Last week it hit its lowest level since early March, then rebounded slightly to 1269. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - 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 6 bps to 268 bps. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - 2 10

 

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows:  0.6% upside to TRADE resistance, 1.4% downside to TREND support.

 

WEEKLY RISK MONITOR FOR FINANCIALS: LITTLE CHANGE WEEK OVER WEEK - XLF

 

 

Joshua Steiner, CFA

 

Allison Kaptur


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