European Banking Monitor: Swaps Tighten, Greece Kicks the Can

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 




European Financial CDS - Swaps mostly tightened among European banks last week.  The median change was -8 bps. Greek banks led the move with tightening between -240 bps and -991 bps as further progress was made with the country's recovery plan; Germany's lower house of parliament on Friday approved the bailout extension that Eurozone finance ministers had agreed on the week before.


European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart1 financials CDS


Sovereign CDS – Sovereign swaps mostly tightened over last week. Portuguese sovereign swaps tightened by -19.8% (-33 bps to 135 ) and Italian sovereign swaps widened by 15 bps to 110. Investors' sentiment was boosted by positive progress in Greece with Germany approving the four-month bailout extension.


European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart2 sovereign CDS


European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart3 sovereign CDS


European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart4 sovereign CDSS


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 11 bps.


European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart5 euribor OIS spread


Matthew Hedrick



Ben Ryan







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 market 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 “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 SOYBEANS, COTTON, and COPPER markets experienced the most BULLISH relative positioning changes week-over-week
  • The SUGAR, ORANGE JUICE, and, COFFEE markets experienced the most BEARISH relative positioning changes week-over-week

Commodities Weekly Sentiment Tracker - chart1 sentiment


Commodities Weekly Sentiment Tracker - Chart1B


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

  • The LEAN HOGS, WTI CRUDE OIL, and CORN markets are positioned for HIGHER PRICES near-term
  • The LIVE CATTLE, COCOA, and HEATING OIL markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month spread


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

  • The WTI CRUDE OIL, SUGAR, and NATURAL GAS  markets are positioned for HIGHER PRICES in 1-year  
  • The LIVE CATTLE, COCOA, and SOYBEANS markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr spread


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 - chart4 open interest


Ben Ryan



The Hedgeye Gaming, Lodging, and Leisure team will host a conference call on Tuesday, March 3rd at 11AM to discuss the latest findings from our proprietary cruise pricing database.


Points of discussion include:

  • One market experienced a surge in close-in pricing in February while another discounted summer pricing
  • New ship premiums - 1st look at Norwegian Escape premiums
  • Did the Norwegian brand continue to outperform its contemporary peers in the Caribbean and Europe?
  • Are Costa and Anthem holding their ground in Europe?
  • (NEW*) RCL pricing vs load in Asia
  • (NEW*) Same-ship pricing across different markets (e.g. Europe vs Caribbean)

Please contact for dial-in information.

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March 2, 2015

On today's edition of RTA Live, Hedgeye CEO Keith McCullough runs through the Real-Time Alerts positions as of 10:15AM ET before taking subscriber questions on Gold, Bonds, and Warren Buffet.


Japan, The Euro and Oil

Client Talking Points


Another horrendous economic data point with Auto Sales -14.2% year-over-year in FEB, so Japanese stocks make another fresh 15 year high on that at +8% year-to-date for the Nikkei moving up +2.3% on the week (S&P 500 was -0.3% last week); Nikkei loves Burning Yens.


The Euro is oversold to fresh year-to-date lows of $1.11 last week (-7% vs. USD year-to-date) and bouncing small +0.2% this morning on a mixed bag of PMI prints (Italy better, Germany in line, France sucking wind) – Italian stocks +2.3% last week (+0.6% this morning) = +18.2% year-to-date!


WTI was down -2.1% last week on #StrongDollar +1.1% (back to its JAN highs) and the Oil #deflation continues this morning -1.4%  with next immediate-term TRADE support of $47.66/barrel and a risk range of 47.66-53.08 (no $60-70 price deck from us). 

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

WTI was down -2.1% last week on #StrongDollar +1.1% (back to its JAN highs) and the Oil #deflation continues this morning -1.4%  with next immediate-term TRADE support of $47.66/barrel and a risk range of 47.66-53.08 (no $60-70 price deck from us). 


Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.


Hologic (HOLX), at this stage in their product cycle and in the current stage of the economic cycle, has some very impactful tailwinds emerging to their revenue growth and the implied growth in the future. A stock generally will perform really well when doubt about future growth turns to optimism while the most recent data confirms the optimism. So far, we have a little bit of both; recent positive data like the December 2014 quarter upside and consensus estimates and ratings starting to move off of multi-year lows. A less-worse trend in Pap testing and rising patient volume can combine to get us close to flat for HOX’s Cytology (Pap) business. As the growth in Cytology improves and is less of a drag, the 3D Mammography growth can flow through. We think the outlook is bright, and with a few more data points, we think a lot more investors will agree with us.

Three for the Road


In today's Early Look "Hairy Little Forecasters" I show you the flow-through from Global #Deflation to sector returns



We must find time to stop and thank the people who make a difference in our lives.

-John F. Kennedy


Consumer Discretionary stocks (XLY) led gainers, +0.7% on the week to +5.3% year-to-date and Energy stocks (XLE) led losers -1.9% on week-over-week at -0.2% year-to-date.

CHART OF THE DAY: Beating Beta (It Isn't Easy, But It Is Achievable) $SPY $TLT

CHART OF THE DAY: Beating Beta (It Isn't Easy, But It Is Achievable) $SPY $TLT - 03.02.15 chart


This is an excerpt from today's Morning Newsletter written by Hedgeye CEO Keith McCullough.


Beating beta isn’t easy, but it is achievable. Full loaded with the February v-bottom US stocks put in after a terrible January, neither the Dow nor the SP500 (+1.7% and +2.2% YTD, respectively) are beating the Long Bond (TLT total return +3.3% YTD).


But that’s not new either. As you can see in the Chart of The Day, the Long Bond (TLT) has been beating CNBC’s core advertising quote (SP500) handily ever since both growth and inflation started slowing at the beginning of 2014.


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