MarsYu
Regional banks (NYSEARCA:KRE), (IAT) are showing some buyable weakness despite sector concerns, said Jeff Degraaf, Renaissance Macro Research chairman and CEO.
In a CNBC interview, Degraaf said that concerns in the regional banks sector (KRE), (IAT) are episodic and idiosyncratic, but that the group remains oversold.
Regional banks, he said, did have a breakout, “which could have been a bull trap — and still might prove to be.”
“If we look at the banks, people are worried about the equities,” he said. “But when we look at the credit default swaps, and some of the things are happening in credit, they just couldn’t care less. In fact, the credit spreads relative to the market are at their lowest in a year, well below where we were with Silicon Valley Bank.”
The credit default swaps are where they were in 2022 on an absolute basis, Degraaf added.
“So, there’s a mismatch here,” he said. “Either the credit markets aren’t seeing it, and the equities are seeing it, [or the other way around]. And I think it really is the equity markets overreacting to something that is probably episodic and has some idiosyncratic non-systemic issues.”
The S&P Regional Banking ETF (KRE) is up more than 6% in the past five days, and up 5.22% from the past six months.
But, overall, he said, the regional banks (KRE) “are in a pretty good spot here.”
