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Shall we go shopping, old way?

27 February 2018 by pdonnat

Macy’s released a decent set of results, better sales and cash flows generation with property sale. Today, Macy’s is the best performer of the US investment grade index constituents, 20bps tighter. Staying a weak BBB, Macy’s will remain in the next investment grade series. The name is active in CDS with more than 2.3BUSD open interest (visit OTCStreaming ) for a 5.8BUSD total bonds’ outstanding. We have many times grappled with retail sector poor performance. Macy’s has stopped its decent to hell. The name was trading as wide as 350bps early November 2017 but the risk reward of a short at this level needs a continuous negative news flow. Macy’s has at least benefited from the optimism of consumers (c.f. February reading of the Conf. Board Consumer Confidence at 131, the highest over the last 10 years). Consumers were motivated to go shopping, online but old way as well. Meanwhile, the credit market was well oriented with short covering. Jerome Powell testimony brought back some volatility and a last hour weakness in credit indices especially in the US.