Editor’s Note: Below is a brief excerpt from an institutional research note written by Hedgeye Financials analyst Josh Steiner. To access our Financials team’s research ping firstname.lastname@example.org.
The trend of tepid risk readings broke last week with 6 of 13 indicators flashing short-term warning signals.
Most notably, the TED spread, a measure of counterparty risk in the financial system, spiked by 6 bps to 57. That is the highest reading since January 2012. Separately, the Shifon Index (China's TED Spread equivalent) has been quietly, but steadily creeping higher for the past month. Meanwhile, CDS widened globally, the high yield YTM shot up by +13 bps to 6.43%, and the price of Chinese steel dropped -1.5%.