WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES

Last week, 2 of the 8 risk measures registered positive readings on a week-over-week basis and 6 were negative.  The metrics mostly showed modest declines, with the TED spread the only significant bright spot.  

 

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. Financials CDS Monitor – Swaps were modestly negative last week.  Swaps tightened for 9 of the 29 reference entities, while 20 widened.    Conclusion: Negative.

 

Widened the most vs last week: AXP, AIG, MMC

Tightened the most vs last week: MTG, UNM, MBI

Widened the most vs last month: JPM, BAC, PMI

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

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - cds US

 

2. European CDS Monitor – In Europe, swaps for 22 of the 39 reference entities widened and 17 tightened.   Conclusion: Negative.

 

Widened the most vs last week:  Erste Group, KBC Group, Bank of Ireland

Tightened the most vs last week: DnB NOR, Sberbank, Svenska Handelsbanken

Widened the most vs last month: Intesa Sanpaolo, Societe Generale, Hannover Rueckversicherungs

Tightened the most vs last month: DnB NOR, Nordea Bank, Svenska Handelsbanken

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - CDS euro

 

3. High Yield (YTM) Monitor –High Yield rates were almost flat last week, rising 1 bp. Rates closed the week at 8.48% versus from 8.47% the week prior. Conclusion: Negative.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - high yield

 

4. Leveraged Loan Index Monitor – The leveraged loan index rose 1 point last week, closing at 1492 versus 1491 the week prior, its second week with almost no change.  Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - leveraged loan index

 

5. TED Spread Monitor – Last week the TED spread continued to fall, closing at 18 bps versus 22 bps the prior week. Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - TED spread

 

6. Journal of Commerce Commodity Price Index – Last week, the index fell 1 point, closing at 12.73 versus the prior week’s close at 13.65.  Conclusion: Negative.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - JOC

 

7. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose 27 bps, ending the week at 1075 bps versus 1048 bps the prior week. Conclusion: Negative. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - 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 last week, closing at 220 versus 213 the prior week.  Conclusion: Negative.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MODEST DECLINES - Markit

 

Joshua Steiner, CFA

 

Allison Kaptur


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