WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE

Summary

Last week, 7 of our 8 risk measures registered positive (improved) readings on a week-over-week basis, while one was neutral. None were negative.

 

Our risk monitor looks at the following metrics weekly:

1. CDS for all available US Financials (29 companies)

2. CDS for large European Financials (39 companies)

3. High Yield

4. Leveraged Loans

5. TED Spread

6. Journal of Commerce Commodity Price Index

7. Greek Bond Spreads

8. Markit MCDX

 

1. US Financials CDS Monitor – Swaps were mostly positive last week.  26 of the 29 CDS reference entities tightened, while 3 widened.   

Conclusion: Positive.


Tightened the most vs last week: AXP, JPM, PMI

Widened the most vs last week: TRV, ALL, SLM

Tightened the most vs last month: MS, AXP, MBI

Widened the most vs last month: TRV, ALL, SLM

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - cds

 

2. European CDS Monitor – We include a look at European swaps to gauge risk perception across the Atlantic, particularly following the release of the stress tests.  European financials CDS was largely unchanged day over day, demonstrating the relatively muted market reaction to the release of the stress tests.   

Conclusion: Positive. 


Tightened the most vs last week: EFG Eurobank Ergasias, Caja de Ahorros del Mediterraneo, UBS

Widened the most vs last week: Erste Group Bank, HSBC, RBS

Tightened the most vs last month: BBVA, Credit Suisse, UBS

Widened the most vs last month: Alpha Bank, National Bank of Greece, Investor AB

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - euro cds

 

3. High Yield (YTM) Monitor – High Yield rates fell 14 bps last week. Rates closed the week at 8.60% down from 8.74% the week prior.  

Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - high yield

 

4. Leveraged Loan Index Monitor - Leveraged loans rose by 9 points last week, closing at 1475 versus 1466 the week prior.  

Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - leveraged loan

 

5. TED Spread Monitor - Last week the TED Spread fell slightly, closing at 35 bps versus 38 bps last week.  

Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - ted spread

 

6. Journal of Commerce Commodity Price Index – The  JOC smoothed commodity price index is a useful leading indicator.  A sharp sell-off in this index starting in July ’08 heralded further declines in the stock market.  This week, the index rose slightly, closing at 9.51, up just over 2 points versus last week’s close at 7.29. 

Conclusion: Positive. 

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - joc

 

7. Greek Bond Yields Monitor – Greek bonds yields and CDS continued to plateau at a high level.  Last week yields rose 13 bps, ending the week at 1038 bps versus 1025 bps the prior week.  

Conclusion: Neutral.

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - greek bond

 

8. 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 include a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices.  A volatile week ended with spreads closing down 7 bps at 214 bps versus 221 bps a week ago. 

Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS - BROADLY POSITIVE - markit

 

Joshua Steiner, CFA

 

Allison Kaptur