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*** We are including our Earnings Scorecard at the end of this note ***

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 5 of 10 improved / 3 of 10 unchanged / 2 of 10 worsened
  • Intermediate-term (MoM): Positive / 6 of 10 improved / 1 of 10 worsened / 3 of 10 unchanged
  • Long-term (150 DMA): Negative / 7 of 10 worsened / 2 of 10 improved / 0 of 10 unchanged / 1 of 10 n/a

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - summary

1. US Financials CDS Monitor – Swaps were mixed last week but leaned negative.  Swaps tightened for 11 of the 29 reference entities and widened for 18.

Tightened the most vs last week: RDN, MBI, AGO

Widened the most vs last week: JPM, BAC, WFC

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

Widened the most vs last month: BAC, WFC, PGR

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - us fins cds

2. European Financials CDS Monitor – In Europe, swaps indicated lessening risk. Swaps tightened for 29 of the 39 reference entities tightened and widened for 9.  

Tightened the most vs last week: Alpha Bank, National Bank of Greece, Sberbank

Widened the most vs last week: Deutsche Bank, Assicurazioni Generali, Investor AB

Tightened the most vs last month: Sberbank, Royal Bank of Scotland, Svenska Handelsbanken

Widened the most vs last month: Bank of Ireland, HSBC, EFG Eurobank

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - euro fins cds

3. Sovereign CDS  – Sovereign CDS fell 29 bps on average last week, led by Ireland, Portugal, and Greece once again. 

 

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - sov cds

4. High Yield (YTM) Monitor – High Yield rates fell slightly last week, closing at 7.94 on Friday.  

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - high yield

5. Leveraged Loan Index Monitor – The leveraged loan index rose 7.3 points last week, closing at a new YTD high. 

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - lev loan

6. TED Spread Monitor – Last week the TED spread fell, closing at 15.4 bps.

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - ted spread

7. Journal of Commerce Commodity Price Index – Last week, the index rose 3.96 points, closing at the highest level since early June.

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - joc

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields continued to plummet, falling another 88 bps.

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - greek bond yield

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 rose slightly last week, closing at 201 versus 199 the prior week.   

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE 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 276 versus 270 the prior week.  

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - baltic

Earnings Scorecard

This morning we are introducing our rolling earnings scorecard which includes all financials that have reported thus far in the earnings season along with subsector averages and our proprietary Hedgeye Earnings Score. The score evaluates company performance across ten measures, looking for either sequential improvement or decline and performance relative to expectations. A "perfect" score would be 10 while the worst possible score is negative 10. Over the course of an earnings cycle, it can get confusing trying to gauge how both individual companies and whole subsectors are faring relative to the group. It is our intention to simplify that process with this product, which we will be publishing each morning over the course of the earnings season as an embedded table in our regular morning posts.

WEEKLY FINANCIALS RISK MONITOR - STILL POSITIVE ON A SHORT AND INTEREMEDIATE TERM BASIS - EARNINGS SCORECARD

Joshua Steiner, CFA

Allison Kaptur