WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES

This week's Financials Risk Monitor is evenly split, with four metrics worsening week over week and four improving.  European risk metrics (Greek bond spreads and European financials CDS) continue to flash warnings signs, while U.S. metrics are mostly flat to better.  The Markit measure of municipal bond risk also showed increasing risk, as a potential default by Harrisburg, PA, looms this week.  

 

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

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM summary

 

1. US Financials CDS Monitor – Swaps were positive across the board last week.  Swaps tightened for all of the 29 reference entities.    Conclusion: Positive.

 

Tightened the least vs last week: C, PGR, MBI

Tightened the most vs last week: JPM, LNC, HIG

Widened the most vs last month: SLM, AGO, MMC

Tightened the most vs last month: JPM, GS, UNM

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM US CDS

 

2. European Financials CDS Monitor – In Europe, CDS was mixed.  Swaps tightened for 11 of the 39 reference entities and widened for 28.   Conclusion: Negative.

 

Widened the most vs last week:  Banco Bilbao, DnB NOR, Credit Suisse

Tightened the most vs last week: Sberbank,  Bakinter S.A., Banco Pastor

Widened the most vs last month: Bank of Ireland, DnB NOR, KBC Group N.V.

Tightened the most vs last month: Deutsche Bank, Alpha Bank, HSBC

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM euro cds

 

3. High Yield (YTM) Monitor – High Yield rates fell 13 bps last week. Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM high yield

 

4. Leveraged Loan Index Monitor – The leveraged loan index rose 6 points last week.  Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM lev loan

 

5. TED Spread Monitor – Last week the TED spread fell slightly, coming down by less than one basis point. Conclusion: Positive.

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM ted spread

 

6. Journal of Commerce Commodity Price Index – Last week, the index fell just under 1 point, closing at 13.53. Conclusion: Negative.

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM JOC

 

7. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose 41 bps, ending the week at 1173 bps versus 1132 bps the prior week.  Conclusion: Negative.

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM greek bond yields

 

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 227 versus 218 the prior week.  Conclusion: Negative.

 

WEEKLY RISK MONITOR FOR FINANCIALS: US STABILIZES WHILE EU DETERIORATES - RM markit

 

Joshua Steiner, CFA

 

Allison Kaptur


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more