Bunds, USD and Japan

Client Talking Points

BUNDS

But today isn’t about the Fed; it’s about this epic Global Yield move that continues to be perpetuated by daily ramps in the 10YR German Bund Yield (up +4 basis points today to 1.02%). This even has JGB 10YR Yield up +4 basis points on the day to 0.54% (but you won’t see a Japanese “rate hike” narrative like you’re seeing as consensus chases momentum in the U.S. on that).

USD

There is nothing like a few solid down days for the U.S. Dollar ahead of the Fed meeting to get Oil to re-test the top-end of our current 58.81-61.98 risk range for WTI… then the USD bounces, and Oil pulls back a full 1% - this component of the correlation trade remains #on.

JAPAN

Instead of burying our heads in the bond yield sand, we did make the call to re-short the Yen (vs USD) yesterday inasmuch as we reiterated the call to buy Japanese equities at the low-end of our risk range. The Nikkei was up +1.5% overnight vs. something like India which was down -1.9%. There are plenty of long/short ideas out there in Global Macro to stay with.

 

 

**The Macro Show - CLICK HERE to watch a replay of today's show with guest analysis from Gaming, Lodging, and Leisure Sector Head Todd Jordan. Todd gave an update to his Macau outlook and discussed the risk profile given the current supply and demand imbalance.

 

Asset Allocation

CASH 40% US EQUITIES 6%
INTL EQUITIES 14% COMMODITIES 10%
FIXED INCOME 28% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
PENN

Penn National Gaming is a true growth story in regional gaming, finally, ripe with catalysts, same store and new unit growth, and accelerating cash flow.  We see stability in regional gaming revenues over the next several months providing some much needed earnings visibility.  PENN maintains the best new unit growth story in domestic gaming with the opening of the Plainridge casino in Massachusetts in June and the Jamul casino in Q2 2016. PENN has a proven track record as the best regional casino operator and recently proved its prowess at successfully opening racinos (casinos at racetracks) with estimate beating Dayton and Mahoning commencing slot operations last year.

ITB

The takeaway on Purchase Activity was mixed as demand declined -3.0% sequentially but accelerated from +13.1% to +13.9% on a year-over-year basis.  More broadly, and inclusive of the latest week, purchase demand in 2Q continues to reflect both sequential and year-over-year improvement with demand growth for the quarter currently tracking +13.6% QoQ and +12.8% YoY. No major callouts in the latest week as the larger trend towards ongoing improvement in purchase activity in 2Q remains intact. 

CLICK HERE to watch Housing Sector Head Josh Steiner gives a brief update on our call on ITB.

TLT

Considering we are already well passed an above average length expansion, and moving into the second half of 2015 growth and inflation comps (i.e. the base effects) become very difficult, growth is likely to continue to slow. We put the likelihood of a rate hike in 2015 as highly unlikely and continue to expect rates to move to make a series of lower-highs through the balance the year (bullish for EDV, TLT, and VNQ. When forward looking growth expectations are downwardly revised and the Fed kicks the can on rate hike expectations, rates and the dollar move lower. Gold has historically performed well in an environment of falling rates and a declining U.S. dollar and we don’t expect anything different this time around. Supporting our view, both gold (GLD) and treasuries (TLT, EDV) remain BULLISH on an intermediate-term TREND duration (3-months or more).   

Three for the Road

TWEET OF THE DAY

World Bank cuts US GDP from 3.2% to 2.7% (and they are still too high) @HedgeyeDDale

@KeithMcCullough

QUOTE OF THE DAY

Leadership is the capacity to translate vision into reality.

Warren Bennis

STAT OF THE DAY

The Royal Institution of Chartered Surveyors reported on Thursday that the stock of homes per surveyor has fallen 12% this year to 52 properties, the lowest since records began in 1978.