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Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 7 of 10 improved / 1 of 10 unchanged / 2 of 10 worsened
  • Intermediate-term (MoM): Positive / 8 of 10 improved / 1 of 10 worsened / 1 of 10 unchanged
  • Long-term (150 DMA): Negative / 5 of 10 worsened / 2 of 10 improved / 2 of 10 unchanged / 1 of 10 n/a

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - summary

1. US Financials CDS Monitor – Swaps were nearly all positive last week, as they were the previous week.  Swaps tightened for 27 of the 29 reference entities and widened for only two.

Tightened the most vs last week: ACE, ALL, XL

Tightened the least/widened vs last week: BAC, AXP, PRU

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

Tightened the least/widened vs last month: AXP, PRU, PGR

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - cds us fig

2. European Financials CDS Monitor – In Europe, the pattern was similar. Swaps tightened for 35 of the 39 reference entities tightened and widened for the only 4.  The worst-performing banks are located in Ireland and Greece, showing that sovereign debt remains a concern. 

Tightened the most vs last week: Intesa Saopaolo, UBS, HBOS

Widened the most vs last week: Alpha Bank, National Bank of Greece, Bank of Ireland

Widened the most vs last month: Alpha Bank, National Bank of Greece, Bank of Ireland Tightened the most vs last month: RBS, Svenska Handelsbanken, UBS

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - euro cds

3. Sovereign CDS Monitor  – Sovereign CDS fell 8 bps on average last week, led by Ireland, Portugal, and Greece once again. 

 

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - sov cds

4. High Yield (YTM) Monitor – High Yield rates fell last week, closing at 7.98 on Friday, the lowest level since June of 2007.  

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - high yielde

5. Leveraged Loan Index Monitor – The leveraged loan index rose 11.4 points last week, closing at a new YTD high. 

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - lev loan

6. TED Spread Monitor – Last week the TED spread climbed, closing at 17.5 bps.

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - ted spread

7. Journal of Commerce Commodity Price Index – Last week, the index fell 0.66 points, closing at 15.4 on Friday.

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - joc

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields fell 38 bps, ending the week at 977 bps versus 1015 bps the prior week. 

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - greek bond

9. 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 fell last week, closing at 199 versus 217 the prior week.   

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - mcdx

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Last week the index rose, closing at 270 versus 245 the prior week.  

WEEKLY FINANCIALS RISK MONITOR - BROADLY POSITIVE ON A SHORT AND INTERMEDIATE TERM BASIS - baltic

Joshua Steiner, CFA

Allison Kaptur