prev

Daily Trading Ranges, Refreshed [Unlocked]

Takeaway: This is a complimentary look at our proprietary buy and sell levels on major markets, commodities and currencies.

This note was originally published September 08, 2014 at 07:45 in Daily Trading Ranges. Click here to learn how to subscribe.

Daily Trading Ranges, Refreshed [Unlocked]   - 77

 

BULLISH TRENDS

Daily Trading Ranges, Refreshed [Unlocked]   - Slide2

Daily Trading Ranges, Refreshed [Unlocked]   - Slide3

Daily Trading Ranges, Refreshed [Unlocked]   - Slide4

Daily Trading Ranges, Refreshed [Unlocked]   - Slide5

 

BEARISH TRENDS

Daily Trading Ranges, Refreshed [Unlocked]   - Slide6

Daily Trading Ranges, Refreshed [Unlocked]   - Slide7

Daily Trading Ranges, Refreshed [Unlocked]   - Slide8

Daily Trading Ranges, Refreshed [Unlocked]   - Slide9

Daily Trading Ranges, Refreshed [Unlocked]   - Slide10

Daily Trading Ranges, Refreshed [Unlocked]   - Slide11


Commodities Weekly Sentiment Tracker

Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.    

------

 

1.       CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “large speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.

 

The Sugar, Orange Juice, and Corn markets experienced the most BULLISH relative positioning change in the CRB week-over-week.

The bullish positioning changes in sugar and corn reflect the near-term expectation for prices increases:

  • Sugar and Corn have the most bullish expectation for both near-term and longer-term price increases in the CRB Index as measured by the difference between spot prices and longer-dated futures contract prices--> “basis differential” (see below).  
  • Sugar and Corn prices both lower last week adding to the negative basis spread:
    • Corn: -4.2%
    • Sugar: -3.2%

The Cotton, Heating Oil, and Copper markets experienced the most BEARISH relative positioning change in the CRB week-over-week:


Commodities Weekly Sentiment Tracker - chart1 CFTC Net Positions

 

2.       Spot – Second Month Basis Differential: Measures the market expectation for forward looking prices in the near-term.

  • The Sugar, Wheat, and Corn markets are positioned for HIGHER PRICES near-term
  • The Lean Hogs, Soybeans, and Gasoline markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart 2 spot 2nd month

 

 

3.       Spot – 1 Year Basis Differential: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.

  • The Sugar, Wheat, and Corn markets are positioned for HIGHER PRICES in 1-year  
  • The Lean Hogs, Soybeans, and Gasoline markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1 YR basis

 

4.       Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.


Commodities Weekly Sentiment Tracker - chart 4 open interest   

      

Ben Ryan

Analyst

            


Monday Mashup: BLMN, PLKI and More

Investment Ideas

The table below lists our Investment Ideas as well as our Bench -- a list of potential ideas we are watching closely.  We intend to update this table regularly and will provide detail on any material changes.

 

Monday Mashup: BLMN, PLKI and More - 1

Recent Notes

09/02/14 Post-Labor Day Mashup

09/03/14 DRI: A Logical Fallacy

09/04/14 MCD: Why We Are Short

09/05/14 Employment Growth Encouraging for Restaurants

Events This Week

Tuesday, September 9th

  • DEN, PLKI CL King & Associates Best Ideas Conference
  • KKD earnings call 4:30pm EST
  • MCD August 2014 Sales and Revenue Release

Friday, September 12th

  • DRI earnings call 8:30am EST

Chart of the Day

2H14 and 2015 estimates remain too aggressive for MCD and will likely be revised lower over the coming months.

 

Monday Mashup: BLMN, PLKI and More - 2

Recent News Flow

Tuesday, September 2nd

  • DNKN opened its first two full expression restaurants in Modesto and Santa Monica, California.
  • DRI guided 1QF15 EPS $0.31-$0.33 vs. $0.33 consensus and proposed a new board structure that would include four incumbents, four new company nominees and four Starboard nominees.
  • BWLD launched GameBreak, a multi-platform gaming experiencing that allows guests to play a range of fantasy-style and competitive sports games in the restaurant, online, and on a mobile app.
  • RRGB announced the LTO of its Beam-N-Bacon Boozy Shake made with Jim Beam Maple Bourbon, caramel and vanilla soft serve.  The offer will run through Nov. 2nd.
  • BLMN appointed Donagh Herlihy as Executive VP Digital & Chief Information Officer.  Herlihy previously led eCommerce and global information technology strategy and operations at Avon.

Wednesday, September 3rd

  • PLKI promoted Hector Munoz to VP & Chief Marketing Officer-U.S.  Munoz will lead the company's domestic marketing efforts and will report directly to Chief Brand Experience Officer, Dick Lynch.
  • YUM disclosed the impact of supplier issues on comps in China, estimating the division's sales to be down ~13% in 3Q.

Thursday, September 4th

  • JACK announced that Frances Allen is joining the company as President of the Jack in the Box brand, effective October 27th.  Allen previously held senior leadership roles at Denny's, Dunkin' Brands, Sony Ericsson Mobile Communications, PepsiCo and Frito-Lay.

Sector Performance

The SPX (+0.5%) underperformed the XLY (+0.6%) last week.  In aggregate, casual dining and quick service stocks outperformed the SPX.

 

Monday Mashup: BLMN, PLKI and More - 3

Monday Mashup: BLMN, PLKI and More - 4

XLY Quantitative Setup

From a quantitative perspective, the sector remains bullish on an intermediate-term TREND duration.

 

Monday Mashup: BLMN, PLKI and More - 5

Casual Dining Restaurants

Monday Mashup: BLMN, PLKI and More - 6

Monday Mashup: BLMN, PLKI and More - 7

Quick Service Restaurants

Monday Mashup: BLMN, PLKI and More - 8

Monday Mashup: BLMN, PLKI and More - 9

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

LEISURE LETTER (09/08/2014)

Tickers: CZR, MGAM, MGM, PNK, WYNN, MTN

EVENTS

  • Sept 8: China/Macau - Mid-Autumn Festival
  • Sept 8: MAR Analyst Meeting 10 am start
  • Sept 9: 
    • BofAML Gaming & Lodging Conference
    • GLPI & HPT at Wells Fargo Net Lease REIT Forum
    • EXPE & OWW at DB Technology Conference

COMPANY NEWS

CZR – the newly developed and opened, Horseshoe Casino Baltimore, generated nearly $6 million in its first six days of operation - that compares to just over $80 million for Maryland's statewide August reported gaming revenue.

Takeaway: Very strong early results from this property. Maryland continues to outperform.

 

CZR (NY Post) Apollo Management, is in talks to restructure most of the senior debt in its Caesars Entertainment casino company and has recently bought up much of the rest of the debt as well — except for that owned by David Tepper’s Appaloosa Management. Tepper’s $4.5 billion in junior debt has fallen in value to just over 25 cents on the dollar from 58 cents in the last year.  Tepper will have to decide whether to sell the bonds to Black at a loss — or stand firm against the PE mogul and risk losing the full value of his bond investment in a Chapter 11.

Takeaway: A battle of the titans in the making.

 

MGAM – announced today that it will be acquired by Global Cash Access Holdings, Inc. for $36.50 per share, for an aggregate purchase price of approximately $1.2 billion in cash with an expected closing date in early 2015.  According to the press release, the merger is expected to achieve about $30 million of synergies as a combined entity; and, on a pro forma basis, is estimated to generate about $800 million in revenues and $217 million in Adjusted EBITDA based on the last twelve months results as of June 30, 2014. The transaction has been unanimously approved by the boards of directors of the two companies. 

Takeaway: Slot supplier consolidation continues but this one is strange. Why would a ATM servicer buy a slot manufacturer?

 

MGM – selling the Railroad Pass casino in Las Vegas to real estate developer Joe DeSimone’s First Federal Realty for an undisclosed price and the sale should close by year end 2014. Railroad Pass has an 11,000-square-foot casino with 324 slot machines and six table games. It also has 120 hotel rooms, a steakhouse, buffet, coffee shop, a sports book and sits on 24 acres near U.S. Highway 95/93 near the Boulder City border.

Takeaway:  The first small asset sale by MGM and there could be other such sales coming.

 

PNK – disclosed entered into a Separation Agreement and General Release with Michelle Shriver, the Company's Executive Vice President, Operations. Under the Separation Agreement, Ms. Shriver shall be entitled to an aggregate cash severance payment equal to $1,329,300, of which $787,500 shall be payable in accordance with the Company's regular salary payment schedule through February 29, 2016 and $541,800 shall be paid in two equal annual installments on September 4, 2015 and September 4, 2016

Takeaway: Expect another special, one-time but seemingly recurring corporate re-alignment/reorganization charge during the quarter.

  

WYNN – Boston Globe has voiced its support for WYNN over Mohegan Sun regarding the Boston area casino license.  The Globe said that Wynn comes closer to meeting the casino law’s primary objective of creating jobs and economic development, that it has demonstrated much greater public support and that it has better financial strength to deliver on its promises.  The commission starts its final hearings on the license today with the intention of deciding by Friday.

Takeaway: An important supporter for WYNN.  The race will be a close one.

 

WYNN – offered $6 million cash to the Massachusetts Bay Transportation Authority for the purchase of three parcels of land on Lower Broadway that would allow the potential casino the ability to create an access road from Rt. 99. The two-acre parcel is within the MBTA’s large maintenance facility on Lower Broadway and would allow for an access point that doesn’t cross Boston land. It also would allow for traffic signalization improvements to benefit the MBTA’s remaining pieces of land.

Takeaway: A unique solution to avoiding any traffic overlap with the City of Boston.

 

MTN – Judge Ryan Harris ruled Park City Mountain Resort (PCMR) must post a $17.5 million bond by this Friday in order to avoid eviction and operate the full resort for the 2014/15 ski season.  If PCMR fails to post the bond, the judge is likely to enforce his eviction notice. While the $17.5 million is more than the $6.6 million PCMR argued for during the hearing two weeks ago, it is well below the $124 millon sought by Vail.

Takeaway: An expected result

 

 

Genting – beginning October 14, Resorts World Bimini plans to add three weekly sailings between Fort Lauderdale and Bimini via its Bimini SuperFast vessel. 

Takeaway:  These are gaming-centric vessels on its way to a casino


Insider Transactions:

PNK – EVP John A. Godfrey acquired 25,000 shares through the excercise of options at $16.92/share and then sold the same 25,000 shares of stock on Friday, September 5th at an average price of $26.25. Following this transaction, Mr. Godfrey owns 141,722 shares of the company’s stock and 75,000 additional stock options. The transaction was effected per a 10b5-1 trading plan adopted on March 13, 2014. 

 

LHO – EVP and COO Alfred Young sold 10,000 shares of stock on Wednesday, September 3rd at an average price of $37.0921 and now directly owns 60,696 shares in the company.

Takeaway: Both executives selling near 52-week high prices.

INDUSTRY NEWS

Government moves to regulate remote gambling in Singapore Channel News Asia

The remote gambling bill, introduced in Parliament, will help define and prohibit gambling activities via communication platforms.  There will, however, be exemptions to the Bill that was described as a "tightly controlled regime".

 

Gerald Singham, a member of the National Council on Problem Gambling, said he believed that exemptions would apply to current activities like horse racing, F1 and football betting.  Observers say it is very likely that operators like Singapore Pools and the Turf Club, which both offer telephone betting services, will apply for the exemption. 

Takeaway: Small positive for the Singapore casinos

 

Japan Gaming Expansion (Japan Times) It was former Tokyo Gov. Shintaro Ishihara who first proposed it back in 1999 when he invited Diet members to a special promotional event he had set up in the Tokyo Metropolitan Government Building, complete with slot machines. His successor, Naoki Inose, was also quick to jump on the casino bandwagon. But not Inose’s successor, Yoichi Masuzoe, who assumed the post in February.  Masuzoe’s approach is more “cautious,”  and seems pretty determined to keep casinos out of the capital. Earlier this year, the Tokyo Metropolitan Government leased a large tract of public land on the waterfront to BMW for a test-drive course and showroom, land that had previously been set aside for an integrated resort that included a casino. When the metropolitan government was reorganized in July, the division that was nominally in charge of the casino plan was practically made irrelevant. Masuzoe’s most blatant show of opposition was an Aug. 17 appearance on a Fuji TV talk show, in which he talked about not wanting casinos in Tokyo. Members of the press duly noted the choice of medium, since Fuji TV, in collaboration with Mitsui Real Estate and Kashima Construction, had submitted a casino resort plan last September to the Diet committee in charge of special economic zones, one of the pillars of Prime Minister Shinzo Abe’s economic recovery plan.

Takeaway: Like all processes in Japan, the timeline is slow and thoughtful.

 

Macau MICE (GGRAsia) Assistant Professor in Gaming and Hospitality Management at the University of Macau, Glenn McCartney suggested Macau needs a government master plan for tourism as well as an independent commercially focused MICE promotion agency able to make quick decisions on behalf of the sector. Without such an agency, he suggested, the MICE portion of the tourism industry will continue to be shaped by the commercial needs of the gaming operators, some of whom focus primarily on gambling tourism.

Takeaway: The delicate balance between gaming vs. non-gaming remains very topical in front of the gaming concession renewal commentary. 

MACRO

Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye

Macro/Financials team is turning decidedly less positive. 

Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.


Retail Callouts (9/8): Idea List, RH, KSS, FDO, DG, DLTR, HD, AMZN

Takeaway: Hedgeye Retail Idea List, RH 2Q14 earnings preview, KSS discloses 2Q14 e-commerce growth rate - trends continue to soften on the margin.

HEDGEYE RETAIL IDEA LIST

 

Retail Callouts (9/8): Idea List, RH, KSS, FDO, DG, DLTR, HD, AMZN - chart1 9 8

 

This week's changes

 

WSM: Removed from Long Bench. Aside from the quality of the 2Q print - we're eight months away from RH rolling out its Kitchen concept. It will take a while for RH to chip away at WSM, but it's a risk that matters.

 

EVENTS TO WATCH

 

Wenesday (9/10)

  • VRA - Earnings Call: 9:30am
  • FIVE - Earnings Call: 4:30pm
  • WTSL - Earnings Call: 4:30pm
  • RH - Earnings Call: 5:00pm

 

Thursday (9/11)

  • LULU - Earnings Call: 9:00am
  • KR - Earnings Call: 10:00am
  • ULTA - Earnings Call: 5:00pm

 

COMPANY HIGHLIGHTS

 

RH - 2Q14 Earnings Preview

 

Takeaway: We think that people are missing the magnitude of earnings growth at RH, the sustainability of that trajectory over a long period of time, and ultimately the degree to which that will accrue to equity holders. The question is not whether the stock will go to $90 vs $100 (where we see most price targets), but whether it will get to $200 vs $300. Even the best stories, however, are not linear. There will be bumps along the road. But this print should not be one of them.  We’re well above the Street in Sales, Margins and EPS, and we flush out in this note where we could be wrong.

 

The full text to our note can be accessed by clicking the following link (RH – Key Thoughts Ahead of The Print).

 

KSS - 2Q14 dot.com Revenue Numbers (10-Q)

 

Retail Callouts (9/8): Idea List, RH, KSS, FDO, DG, DLTR, HD, AMZN - chart2 9 8

Retail Callouts (9/8): Idea List, RH, KSS, FDO, DG, DLTR, HD, AMZN - chart3 9 8

 

Takeaway: KSS has had the best e-commerce growth rate out of any major retailer over the past eight years (38.9%) CAGR and it has served as a pillar of support for KSS' growth algorithm. That’s clearly weakening. For the 2nd quarter in a row, management didn't disclose the dot.com growth rate during the company's earnings call after 3+ years of disclosure. For the quarter in aggregate, the dot.com growth rate was just north of 19% and that channel contributed about 140bps to the consolidated comp. That would imply 30% growth in July (per 2Q Conference Call) and 15% in May and June. The key here is that the 15% growth rate in the first two months of the quarter was organic as the comparable periods in 2013 were uninterrupted by the dot.com replatform. That syncs with what we've seen over the past two quarters where the dot.com channel grew at a 16.5% and 12.5% clip in 4Q13 and 1Q14 respectively. We have little faith in KSS' ability to get it's store base back to flat comps - which is what the company would need in the back half of the year to get comps for the year to flat and inline with the low end of guidance. We’re at $4.00 for the year. But the part of this story that we think people are missing is that it is likely to earn about $4.00 for the next five years straight.

 

OTHER NEWS

 

FDO, DG, DLTR - Family Dollar Board of Directors Rejects Revised Proposal from Dollar General Based on Antitrust Issues

(http://investor.familydollar.com/investors-relations/news-releases/Press-Release-Details/2014/Family-Dollar-Board-of-Directors-Rejects-Revised-Proposal-from-Dollar-General-Based-on-Antitrust-Issues/default.aspx)

 

  • "Family Dollar Stores, Inc. announced that its Board of Directors has unanimously rejected the revised, non-binding proposal made by Dollar General Corporation on September 2, 2014, on the basis of antitrust regulatory considerations."
  • "Family Dollar’s merger agreement with Dollar Tree contains a customary provision that permits Family Dollar to enter into discussions and share information with any competing bidder, but only if the Board is able to determine that failure to do so would be inconsistent with its fiduciary duties and that the unsolicited, written proposal from the competing bidder would be reasonably expected to lead to a proposal that is not only financially superior, but also 'reasonably likely to be completed on the terms proposed.'”

 

WFM - Whole Foods Market® and Instacart Partner to Offer One-Hour Delivery across 15 Major U.S. Cities

(http://www.businesswire.com/news/home/20140908005181/en/Foods-Market%C2%AE%C2%A0and-Instacart-Partner-Offer-One-Hour-Delivery#.VA2K3vldVD0)

 

  • "Whole Foods Market and one-hour grocery delivery service Instacart announced today a new partnership that enables customers to have Whole Foods Market products delivered in as little as one hour. Customers will soon also have the convenient option to place orders via Instacart and pick up their order at a local participating Whole Foods Market store."
  • "The two companies will pilot the in-store pickup option at select Austin and Boston stores in the next month."

 

HD - Class-action suit targets Home Depot for breach

(http://www.chainstoreage.com/article/class-action-suit-targets-home-depot-breach?ad=news)

 

  • "Several Home Depot customers filed a class-action lawsuit on Thursday, Sept.4 in the U.S. District Court for the Northern District of Georgia, Atlanta Division. The suit alleges that Home Depot failed to meet its legal obligation to protect their credit card and personal information and failed to timely warn them that their information had been stolen or compromised."

 

AMZN - Amazon enters in credit agreement

(http://www.sec.gov/Archives/edgar/data/1018724/000101872414000042/amzn-2014september5x8k.htm)

 

  • “On September 5, 2014, Amazon.com, Inc., Bank of America, N.A., as administrative agent, and the lenders party thereto entered into a credit agreement. The Credit Agreement provides the Company with an unsecured revolving credit facility with a borrowing capacity of up to $2.0 billion. The term of the Credit Agreement is two years, but it may be extended for up to three additional one-year terms if approved by the lenders.”

 

KR - Kroger Goes Shopping for 20,000 New Grocery Workers

(http://www.businessweek.com/articles/2014-09-05/kroger-goes-shopping-for-20-000-new-grocery-workers)

 

  • "The nation’s largest supermarket chain, Kroger, plans to hire about 20,000 workers in a push for growth during a period of grocery consolidation. The new hires will join another 40,000 workers added to Kroger’s roster since 2008, bringing its workforce to 375,000."
  • "The Cincinnati-based retailer opened 216 new supermarkets last year to reach at 2,640 stores in all. Kroger executives increased its capital spending by $200 million annually to expand its retail footprint in 2012 as executives discussed growth opportunities in new cities."

 

CVS, WAG, AAPL - Apple iPhone’s Mobile Payments Expected to Include CVS and Walgreens

(http://recode.net/2014/09/05/apple-iphones-mobile-payments-expected-to-include-cvs-and-walgreens/)

 

  • "Apple’s upcoming mobile payment system will get a big head start with the country’s two largest pharmacy chains coming on board."
  • "CVS and Walgreens are expected to accept purchases made with the new iPhone payment system, details of which Apple plans to announce Tuesday, according to a person briefed on the plans. With more than 15,000 locations combined, acceptance by the two chains will give Apple a huge footprint if all of their stores are involved."

 

Sycamore’s Nine West Footwear Group to Split Into Four Companies

(http://www.bloomberg.com/news/2014-09-05/sycamore-s-nine-west-footwear-group-to-split-into-four-companies.html)

 

  • "Nine West Holdings Inc.’s footwear business will be split up into four separate companies under a plan by private-equity owner Sycamore Partners LLC, part of an effort to squeeze more value from a stable of well-known brands."
  • "The new companies, which will remain part of Sycamore, will consist of Nine West, Anne Klein, Easy Spirit and NW Jewelry Group, according to a statement today. As her company splits up, Nine West Footwear Group Chief Executive Office Kathleen Nedorostek will be stepping down. Former Kohl’s Corp. executive Peggy Eskenasi, meanwhile, is joining Sycamore to help oversee the operations."

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND

Takeaway: Overall, there's a slightly positive bullish bias in our risk monitor on a short-term (5:3) and intermediate-term (7:2) basis.

Current Best Ideas:

 

 MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 19

 

Key Callouts:

 

* 2-10 Spread – The long end of the yield curve has been under steady pressure since the start of the year. Last week it caught a bounce, driving the 2-10 spread wider by 10 bps to 195 bps. This doesn't change the longer-term or intermediate-term dynamic we see, especially as rates are down again this morning (10-year treasury yield down 3 bps to 2.43%).

 

* Chinese Steel – Steel prices in China fell 1.8% last week, or 55 yuan/ton, to 3005 yuan/ton. Prices are down 4.4% on the month and have been in decline since mid-2011. As a reminder, we use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 5 of 12 improved / 3 out of 12 worsened / 4 of 12 unchanged

 • Intermediate-term(WoW): Positive / 7 of 12 improved / 2 out of 12 worsened / 3 of 12 unchanged

 • Long-term(WoW): Negative / 2 of 12 improved / 3 out of 12 worsened / 7 of 12 unchanged

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 15

 

1. U.S. Financial CDS -  Swaps widened for 20 out of 27 domestic financial institutions. The large cap US Financials (money centers, GS, MS) were all wider on the week, though by a nominal 1-2 bps. Specialty Finance companies were also wider, by an average of 4 bps. 

 

Tightened the most WoW: ACE, AIG, UNM

Widened the most WoW: LNC, PRU, GNW

Tightened the most WoW: AIG, MET, ACE

Tightened the least MoM: AON, GNW, AXP

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 1

 

2. European Financial CDS - Swaps were mixed, though, on average, tighter across Europe's banking complex. Apparently, much of the QE-lite move was already priced in. Sberbank widened on the week by 12 bps to 321.  

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 2

 

3. Asian Financial CDS - Broad-based tightening in Asian swaps, led by India's banks. Indian banks saw their CDS tighten by an average of 21 bps. Meanwhile, Chinese bank swaps also tightened by an average of 6 bps. 

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 17

 

4. Sovereign CDS – Sovereign swaps mostly tightened over last week. The US was the exception, widening by 1 bp to 17 bps. European sovereign swaps were tighter across the board on the heels of the ECB's QE-Lite. Portuguese swaps tightened 17 bps to 145 bps while Spanish sovereign swaps tightened by -10.7% (-7 bps to 57 ).

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 18

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 3

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 4

 

5. High Yield (YTM) Monitor – High Yield rates rose 8.0 bps last week, ending the week at 5.66% versus 5.58% the prior week.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 1.0 points last week, ending at 1881.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 6

 

7. TED Spread Monitor – The TED spread fell 0.7 basis points last week, ending the week at 20.4 bps this week versus last week’s print of 21.1 bps.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 7

 

8. CRB Commodity Price Index – The CRB index fell -0.8%, ending the week at 288 versus 290 the prior week. As compared with the prior month, commodity prices have decreased -1.7% We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 8

 

9. Euribor-OIS Spread – 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. The Euribor-OIS spread widened by 1 bps to 17 bps.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 9

 

10. Chinese Interbank Rate (Shifon Index) –  The Shifon Index fell 9 basis points last week, ending the week at 2.82% versus last week’s print of 2.91%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 10

 

11. Chinese Steel – Steel prices in China fell 1.8% last week, or 55 yuan/ton, to 3005 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: BACK TO THE GRIND - 12

 

12. 2-10 Spread – Last week the 2-10 spread widened to 195 bps, 10 bps wider than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 13

 

13. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 0.3% upside to TRADE resistance and 0.6% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: BACK TO THE GRIND - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

next