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European Banking Monitor: Negative Divergences in Italy and Greece

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

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European Financial CDS - Bank swaps were narrowly tighter across Europe last week with negative divergences in Italy and Greece. 

 

European Banking Monitor: Negative Divergences in Italy and Greece - vv. banks

 

Sovereign CDS – Sovereign swaps were mostly uneventful last week with two exceptions. Portugal widened by 73 bps to 474 bps, while Japan tightened by 5 bps to 73 bps. All other major markets were unchanged.

 

European Banking Monitor: Negative Divergences in Italy and Greece - vv.sov1

 

European Banking Monitor: Negative Divergences in Italy and Greece - vv.sov2

 

European Banking Monitor: Negative Divergences in Italy and Greece - vv.sov3

 

Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 12 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

European Banking Monitor: Negative Divergences in Italy and Greece - vv.euribor ois

 

ECB Liquidity Recourse to the Deposit Facility – Deposits rose by 11.5 billion Euros last week. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

European Banking Monitor: Negative Divergences in Italy and Greece - vv.facility


Nike Punk'd Adidas

Takeaway: The logo wars heated up this week when a new star Bayern Munich player (Adidas team) wore a huge Swoosh in his first press conference.

This note was originally published July 05, 2013 at 13:53 in Retail

Things NOT to do on your first day on the job...appear in a PR photo with your new employer while wearing a T-shirt emblazoned with the logo of its nemesis. 

 

Nike Punk'd Adidas - punk

 

Bayern Munich is one of Adidas' top endorsed football clubs, and their new hot-shot midfielder -- Mario Goetze -- sported a Nike T-shirt during his first press conference as a Bayern Munich player on Tuesday. It wasn't even a shirt with a subtle Nike logo on the sleeve or the upper right crest. It was a massive, borderline obnoxious, full-frontal Nike assault.

 

You can bet that someone at Adidas got fired over that miss. 


MACAU: STRONG START TO JULY

There is no change to our YoY GGR projection of 18-22% growth for July following a solid start to the month.  Through the first 7 days, table revenues averaged a strong HK$919 million per day, up 24% YoY and 5% versus June 2013.  Anecdotal indications are that both VIP and Mass traffic contributed to the start.

 

Market shares are pretty much irrelevant so early in the month but as you can see from the table below, MGM and LVS were the biggest gainers from trend.  MPEL and Wynn were the laggards.  In terms of the stocks, we continue to like MPEL and MGM.

 

MACAU: STRONG START TO JULY - macau1

 

MACAU: STRONG START TO JULY - macau2


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Morning Reads on Our Radar Screen

Takeaway: A quick look at stories on Hedgeye's radar screen.

Keith McCullough – CEO

Egypt unrest: Tensions soar amid Cairo killings (via BBC)

IMF May Cut Global Growth Forecast as Emerging Markets Slow (via Bloomberg)

Japan Mergers Fall to Nine-Year Low as Yen Volatility Surges (via Bloomberg)

China ex-rail minister given suspended death sentence (via BBC)

 

Morning Reads on Our Radar Screen - earth2

 

Josh Steiner – Financials

Corzine off the crook: No criminal charges (via New York Post)

Bond investors face a reckoning as interest rates jump (via Los Angeles Times)

 

Daryl Jones - Macro

China Cash Squeeze Seen Creating Vietnam-Size Credit Hole (via Bloomberg)

 

Matt Hedrick - Macro

German economy struggles as exports and output tumble (via Reuters)

 

Kevin Kaiser – Energy

Deadly Train Derailment Fuels Crude-by-Rail Concerns (via WSJ)

 

Jonathan Casteleyn – Financials

Crowded ETF Exit Proving Costly as Bonds Trail: Credit Markets (via Bloomberg)

 

Tom Tobin – Healthcare

Kaiser Health Tracking Poll: June 2013 (via KFF.org)


July 8, 2013

July 8, 2013 - 7 8 2013 7 59 11 AM


MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S.

Takeaway: Asian risk continues to rise while the U.S. looks to be on stabler footing vis-a-vis Friday's jobs report. #RatesRising

Key Takeaways:

Asia continues to be a rising source of risk with both China and India showing growing pressure in their respective banking systems. Chinese banks posted another week of sharp increases in their default swaps. Here are Keith's morning comments on Asia: 

 

CHINA – ugly start to the week for Asian Equities, led lower by Indonesia -3.2% and China -2.4% (Hang Seng -1.3%); Shanghai Comp = -11.7% YTD and every Asian country is bearish TREND @Hedgeye other than Japan right now (Nikkei TREND = 13,668)

 

Domestically, things looked somewhat better for everything outside of the Treasury and gold market. One of our primary risk gauges, junk bonds, finally took a breather last week, cooling off by a modest 4 bps to 6.58%. 30-Yr conforming mortgage rates, however, climbed higher by 24 bps on Friday alone to 4.64% (Bankrate National Daily Average). 

 

Financial Risk Monitor Summary

 • Short-term(WoW): Negative / 2 of 13 improved / 3 out of 13 worsened / 8 of 13 unchanged

 • Intermediate-term(WoW): Negative / 2 of 13 improved / 7 out of 13 worsened / 4 of 13 unchanged

 • Long-term(WoW): Positive / 4 of 13 improved / 1 out of 13 worsened / 8 of 13 unchanged

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 15

 

1. U.S. Financial CDS -  Swaps tightened for 24 out of 27 domestic financial institutions. While there weren't many large moves, it is worth noting that Citi led the pack among the large caps with a 7 bps narrowing to 124 bps.

 

Tightened the most WoW: C, ALL, HIG

Widened the most WoW: UNM, COF, MMC

Widened the least/ tightened the most WoW: SLM, AON, MMC

Widened the most MoM: GS, MS, C

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 1

 

2. European Financial CDS - Bank swaps were narrowly tighter across Europe last week with negative divergences in Italy and Greece. 

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 2

 

3. Asian Financial CDS - Chinese banks post another week of widening. All three major banks we track posted WoW increases of 15-17 bps.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 17

 

4. Sovereign CDS – Sovereign swaps were mostly uneventful last week with two exceptions. Portugal widened by 73 bps to 474 bps, while Japan tightened by 5 bps to 73 bps. All other major markets were unchanged.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 18

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 3

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 4

 

5. High Yield (YTM) Monitor – High Yield rates fell 4.1 bps last week, ending the week at 6.58% versus 6.62% the prior week.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 1.5 points last week, ending at 1784.86.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 6

 

7. TED Spread Monitor – The TED spread fell 0.8 basis points last week, ending the week at 23.19 bps this week versus last week’s print of 24.01 bps.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 7

 

8. Journal of Commerce Commodity Price Index – The JOC index rose 1.4 points, ending the week at -2.59 versus -4.0 the prior week.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 12 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 9

 

10. ECB Liquidity Recourse to the Deposit Facility – Deposits rose by 11.5 billion Euros last week. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 10

 

11. Markit MCDX Index Monitor – Last week spreads widened 2 bps, ending the week at 96 bps versus 94.3 bps the prior week. 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 six 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. We track the 16-V1. 

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 11

 

12. Chinese Steel – Steel prices in China rose 1.4% last week, or 48 yuan/ton, to 3406 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 12

 

13. 2-10 Spread – Last week the 2-10 spread widened to 234 bps, 14 bps wider than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.2% upside to TRADE resistance and 2.1% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: ASIA CONTINUES TO DECOUPLE FROM THE U.S. - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.65%
  • SHORT SIGNALS 78.64%
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