WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Negative / 2 of 11 improved / 4 out of 11 worsened / 5 of 11 unchanged
  • Intermediate-term (MoM): Negative / 2 of 11 improved / 3 of 11 worsened / 6 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: MORTGAGE INSURANCE SWAPS WIDEN - summary

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

Widened the most vs last week: GS, PMI, PRU

Tightened the most vs last week: ACE, MBI, GNW

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

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

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - us cds

2. European Financials CDS Monitor – Banks swaps in Europe were evenly split last week, widening for 19 of the 39 reference entities and tightening for 19, with one flat.

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - euro cds

3. European Sovereign CDS – European sovereign swaps fell last week, dropping 32 bps on average. 

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - sov cds

4. High Yield (YTM) Monitor – High Yield rates rose slightly last week, ending at 7.14 versus 7.12 the prior week. A data error or methodology change appears to be the cause of the step function in the Bloomberg series.  We are awaiting clarification on this shift.  

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - high yield

5. Leveraged Loan Index Monitor – The Leveraged Loan Index remained flat at 1621 again last week.   

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - lev loan

6. TED Spread Monitor – The TED spread backed off its high last week, ending the week at 24.0 versus 26.2 the prior week.

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - ted spread

7. Journal of Commerce Commodity Price Index – Last week, the JOC index continued to decline, ending the week at 16.7, 4.4 points lower than the prior week.  This fall brings the JOC to a new year-to-date low.

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - JOC

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields fell 7 bps versus the prior Friday.

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE 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 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 ticked up to 105 from 99. 

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - 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% before bouncing off the lows.  Last week it fell 34 points to 1306.

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - baltic

11. 2-10 Spread – We track the 2-10 spread as a proxy for bank margins.  Last week the 2-10 spread widened 3 bps to 263 bps. 

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - 2 10

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows:  2.0% upside to TRADE resistance, 0.1% downside to TRADE support.

WEEKLY RISK MONITOR FOR FINANCIALS: MORTGAGE INSURANCE SWAPS WIDEN - XLF

Joshua Steiner, CFA

Allison Kaptur