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REPLAY | The Macro Show with Keith McCullough

If you didn't see The Macro Show this morning, we've got you covered. Watch the replay right here. 

 

 

 

The Macro Show is Hedgeye's pre-market rundown of what's happening in global macro where we offer insight on how you, the investor, can position yourself for the day ahead. We share 15 minutes or less of prepared market analysis and commentary and then answer your questions in a live Q&A session.


Cartoon of the Day: G(LOW)Bal Bond Yields

Cartoon of the Day: G(LOW)Bal Bond Yields - 10 yr yield cartoon 04.20.2015

"The UST 10YR Yield is at 1.87%, down 31 basis points year-to-date as lower-for-longer continues to get priced in," Hedgeye CEO Keith McCullough wrote earlier today. "The German 10YR is at 0.07% and the Swiss 10YR is at negative -0.21% this morning.


McCullough: Global Bond Yields Flummoxing Investors

 

In this brief excerpt from today’s institutional morning macro call, Hedgeye CEO Keith McCullough discusses the continuing descent of bond yields around the world.

 

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Daily Trading Ranges

20 Proprietary Risk Ranges

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RCL Q1 2015 CONF CALL NOTES

Takeaway: Eastern Med issues and worse non-US onboard spend accounted for lower yield guidance. Asia (ex China) also mixed. The momo is over.

RCL Q1 2015 CONF CALL NOTES - 11

 

RCL Q1 2015 CONF CALL NOTES - 2

Source: RCL

 

CONF CALL

  • Anthem of the Seas has been 'quite profitable and generating strong returns'
  • Quantum of the Seas bookings in China has been 'heartwarming'
  • Double-Double program still on track
    • Hedgeye is skeptical
  • China now represents 6% of capacity at a higher level % of the company's profitability
  • Bookings curve moved forward since they marketed sailings earlier than usual; thus, less need to offer late-minute discounts
  • In March, adopted new policy that they will not offer late-minute discounting in North America (excluding 2-4 night itineraries). This may negatively impact short-term bookings but believe this is the right method over the long-term.
  • Strength in close-in pricing in Caribbean boosted Q1. Caribbean capacity had 69%.
  • Quantum had significantly higher premiums vs rest of fleet
  • At this point, Booking and APDs are higher vs same time last year
  • Previous guidance already incorporated better Caribbean pricing in Q2-Q4 
    • Continue to expect low single digit yield increase in Caribbiean sailing
  • Europe:  volumes slightly down vs 2014. Capacity up 5% YoY.  Strength coming down Baltic/Med doing well. Eastern Med are soft, particularly Turkey. Still see mid-single digit yield increase in 2015.
  • Asia:  in 2015, capacity accounts for 15%.  Asia itineraries, as a whole, has been trending well but individual itinerary's performance vary. Quantum is booked 80% for the summer 2015.  2016 is looking good as well.
    • We agree. As we wrote in "RCL: HOT ASIA BOOKINGS", Quantum bookings have been stellar. But pricing performance is mixed particularly with the older fleet underperforming in non-China itineraries.
    • Expect low to mid single digit yield increase.
  • Lower Fuel consumption due to better fuel initiatives. 
  • 2Q 2015: capacity mix: 37% Caribbean, 25% Europe, 10% Alaska, 10% China

 

Q & A

  • China: 66% more capacity in China this year.  Good yield growth but not double digit growth this time around.
  • Southeast Asia: yields are flattish.  
  • Australia:  yields are up slightly
  • Consumer pay bundled packages in non-US$
  • Onboard rev will still have a record year
  • 150bps change from Q2 -Q4 ; half of it on anticipation of weaker non-US onboard spend. Another half of it is on Eastern Med and new NA pricing pricing policy mentioned above
  • Is new NA pricing policy shared by their competitors? They don't think so.
  • Repositioning is great for Quantum but lower yields for everyone else who has repositioned.
    • We've been concerned about the underperformance of the pre-2006 fleet.
  • Why NCC ex fuel much higher in 2Q? mostly due to Quantum repositioning to China
  • Relative to guidance in October 2014, currency impact -$0.59, +$0.54 fuel impact.  Relative to guidance in Jan 2015, -$0.36 (-$0.15 (fuel), -$0.20 (FX).
  • Committed to keeping costs down this year and next year
  • 2-4 itineraries is only a small portion of their NA itineraries
  • FX impact onboard spend depends on exposure (see chart above)

Keith's Macro Notebook 4/20: Euro | DAX | UST 10YR

Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.


European Banking Monitor: Widening Across the Board

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 - Swaps widened almost universally among European banks last week as a lack of progress in Greek bailout negotiations racked investors' nerves.

 

European Banking Monitor: Widening Across the Board - chart1 financials CDS

 

Sovereign CDS – Sovereign Swaps mostly widened over last week. Italian, Spanish, and Portuguese swaps led the way, widening by 25 bps to 133, 19 bps to 105, and 30 bps to 162, respectively.

 

European Banking Monitor: Widening Across the Board - chart2 sovereign CDS

 

European Banking Monitor: Widening Across the Board - chart3 sovereign CDS

 

European Banking Monitor: Widening Across the Board - chart4 sovereign CDS

 

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 was unchanged at 12 bps.

 

European Banking Monitor: Widening Across the Board - chart5 euribor.OIS spread

 

Matthew Hedrick 

Associate

 

Ben Ryan

Analyst

 

 

 

 



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