Asset Risks Dashboard
Our surveillance risk scores across Equities, Interest Rates, Credit and FX aim to track market conditions and gauge risk sentiments.
Welcome to our macro risk dashboard page. In the interactive visualisations below, you can toggle across time series representations of risk assessment under each of four key asset classes. Full description of how the composite risk scores are calculated is provided below, along with a short commentary on the underlying drivers and developments.
Latest update: 8 July 2024.
Equities
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : S&P 500 Volatility (50%) and Valuation (50%).
The equities risk score remains benign, and is holding near 2024 low. The VIX continues to be well-behaved. US stock valuations have stayed high, buoyed by equity prices that are at their record highs amid the outperformance of tech stocks and robust corporate earnings. The risk score would be biased higher should the US economy unexpectedly slow significantly and/or unknown risks emerge.
Interest Rates
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : 3M/10Y US Treasury yield spread (30%), 10Y US real yield (15%), 5Y5Y inflation swap (10%), 10Y US swaption volatility (15%) and 10Y Italy BTP - German Bund yield spread (30%).
The interest rate risk score has inched up but remains benign. The reversion was due to an increase in Europe's sovereign spreads and higher risk premium after the unexpected announcement of French parliamentary elections. Compared with our previous update in June, US swaption volatility has ticked up, while the US real yield and inflation swaps have been stable.
Credit
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : USD Libor-OIS spread (25%), US High Yield spread (25%), Europe High Yield spread (25%) and Emerging Markets Sovereign Credit spread (25%).
The credit risk score has edged up but is still benign. This uptick was driven by wider EM Sovereign credit spreads, which rose to their highest levels since December 2023, amid weaker risk appetite from expectations of higher for longer US interest rates. Both US High Yield and Euro High Yield still look well-behaved. The risk score would be biased higher in the event that EM stress mounts and/or DM growth/financial stability risks intensify unexpectedly.
Foreign Exchange
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : Broad US Dollar (70%), EUR-USD xccy basis swap Measure of USD funding premium/discount relative to EUR (15%) and JPY-USD xccy basis swap (15%).
The FX risk score is hovering near this year's high, with the climb since early-June driven by appreciation of the US dollar. The US Fed has pared back its expectations for rate cuts in 2024, keeping rates higher for longer, while some other major central banks have begun easing. Nonetheless, USD funding conditions remain comfortable across various funding markets. The risk score is biased higher in the event that USD funding conditions deteriorate or the US dollar strengthens even more aggressively.
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