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Last week, 7 of the 8 risk measures registered positive readings on a week-over-week basis and one was negative. This brings to three the string of overall positive sequential weeks.

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.  Swaps for 24 of the 29 CDS reference entities tightened, while 5 widened, with an average change of -4.3%.   

Conclusion: Positive.

Tightened the most vs last week: LNC, MET, PRU

Widened the most vs last week: AXP, PMI, RDN

Tightened the most vs last month: MBI, MET, AGO

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

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - cds us

2. European CDS Monitor – In Europe, swaps for 29 of the 39 reference entities tightened and 10 widened, with an average tightening of 2.2%.    

Conclusion: Positive.

Tightened the most vs last week: Erste Group, Natixis, Svenska Handelsbanken

Widened the most vs last week:  Hannover Rueckversichrungs, Intesa Saopaolo, Aviva

Tightened the most vs last month: Banco Espirito Santo, Alpha Bank, EFG Eurobank Ergasias

Widened the most/tightened the least vs last month: Intesa Saopaolo, Hannover Rueckversichrungs, Caja de Ahorros del Mediterraneo

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - cds europe

3. High Yield (YTM) Monitor – High Yield rates fell 14 bps last week. Rates closed the week at 8.30% down from 8.44% the week prior.

 Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - high yield

4. Leveraged Loan Index Monitor – The leveraged loan index rose 4 points last week, closing at 1493 versus 1489 the week prior. This improvement was a deceleration from the steady rise in July.  

Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - leveraged loan

5. TED Spread Monitor – Last week the TED spread fell 4 bps, closing at 27 bps versus 31 bps the prior week. Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - ted spread

6. Journal of Commerce Commodity Price Index – Last week the index rose 5.49 points, closing at 18.11 versus the prior week’s close at 12.62.   

Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - joc cpi

7. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields fell 15 bps, ending the week at 1015 bps versus 1030 bps the prior week.

Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - greek bonds

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 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 rose very slightly last week, closing at 206 versus 204 the prior week.   

Conclusion: Negative.

WEEKLY RISK MONITOR FOR FINANCIALS - ANOTHER POSITIVE WEEK - markit

Joshua Steiner, CFA

Allison Kaptur