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Last week, 4 of the 8 risk measures registered positive readings on a week-over-week basis while 2 were neutral and 2 were negative.  A summary table is shown below.

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: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - summary

1. Financials CDS Monitor – Swaps were mostly negative last week.  Swaps tightened for 8 of the 29 reference entities and widened for 21.    Conclusion: Negative.

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

Widened the most vs last week: AXP, PRU, CB

Tightened the most vs last month: JPM, SLM, AIG

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

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - cds US

2. European CDS Monitor – In Europe, CDS was nearly all negative.  Swaps tightened for only 2 of the 39 reference entities tightened and widened for the other 37.   Conclusion: Negative.

Widened the most vs last week: Greek banks: Alpha Bank, EFG Eurobank Ergasias, National Bank of Greece

Tightened the most vs last week: IKB Deutsche, Caja de Ahorros del Mediterraneo, Svenska Handelsbanken

Widened the most vs last month: EFG Eurobank, Bank of Ireland, DnB NOR

Tightened the most vs last month: Hannover Rueckversicherungs, Bankinter, HSBC Holdings

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - cds euro

3. High Yield (YTM) Monitor – High Yield rates fell slightly last week, closing at 8.40 on Friday. Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - high yield

4. Leveraged Loan Index Monitor – The leveraged loan index rose 4.5 points last week.  Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - leveraged loan

5. TED Spread Monitor – Last week the TED spread rose slightly, closing at 15 bps. Conclusion: Neutral.

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - ted spread

6. Journal of Commerce Commodity Price Index – Last week, the index rose a hair, closing at 15.00 on Friday. Conclusion: Neutral.

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - joc

7. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields fell 51 bps, ending the week at 1105 bps versus 1156 bps the prior week.  Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - 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 were down last week, closing at 215 versus 227 the prior week.  Conclusion: Positive.

WEEKLY RISK MONITOR FOR FINANCIALS: FOURTH WEEK IN A ROW WITH MORE POSITIVE THAN NEGATIVE - markit

Joshua Steiner, CFA

Allison Kaptur