EU BASIC INDUSTRIES: BASIC INDUSTRIES: Celanese (CE Baa3*-/BB+/BBB-): S&P Downgrade
Further downgrades appear to be off the table for now. Management is committed to IG ratings; a return could be possible from 2026 if deleveraging goes to plan.
- While Moody’s went from a long-standing outlook negative to watch negative following weak 3Q results, S&P didn’t hang around and has done a straight one notch downgrade from outlook negative.
- Moody’s release suggested to us a downgrade is likely absent imminent asset sales.
- S&P didn’t appear to take potential asset sales into consideration, possibly from direct conversations or noting comments on the earnings call that played the prospect down.
- S&P saw adj. gross leverage at 5.7x at 3Q 24 (we had 4.7x) and assume 4.4x at FY25, 3.4x at FY26. It has a 4-5x range for the BB+ rating and FFO/D of 12-20%.
- 1.3x turns deleveraging by FY25 looks optimistic to us, but a return below the 5x upper end should be achievable.
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STIR: OI Points to Mix Of Long Setting & Short Cover In SOFR Futures On Tuesday
OI points to net long setting across the front 7 SOFR futures during yesterday’s rally, with net short setting then seemingly dominating in the greens and blues.
- Yesterday’s sharp adjustment lower in crude oil futures drove the early dovish move in U.S. STIRs, with softer-than-expected Canadian CPI data and a weak headline NY Fed Empire manufacturing reading also factoring in.
| 15-Oct-24 | 14-Oct-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,236,685 | 1,230,333 | +6,352 | Whites | +33,304 |
SFRZ4 | 1,045,074 | 1,033,543 | +11,531 | Reds | +32,531 |
SFRH5 | 989,734 | 983,886 | +5,848 | Greens | -2,138 |
SFRM5 | 853,326 | 843,753 | +9,573 | Blues | -13,513 |
SFRU5 | 697,065 | 676,776 | +20,289 |
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SFRZ5 | 895,675 | 881,247 | +14,428 |
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SFRH6 | 604,441 | 603,760 | +681 |
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SFRM6 | 603,457 | 606,324 | -2,867 |
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SFRU6 | 545,590 | 546,355 | -765 |
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SFRZ6 | 614,489 | 617,288 | -2,799 |
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SFRH7 | 361,926 | 363,884 | -1,958 |
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SFRM7 | 301,544 | 298,160 | +3,384 |
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SFRU7 | 248,907 | 250,357 | -1,450 |
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SFRZ7 | 257,282 | 263,723 | -6,441 |
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SFRH8 | 181,635 | 182,739 | -1,104 |
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SFRM8 | 151,876 | 156,394 | -4,518 |
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EU-BILL AUCTION RESULTS: 3/6-Month EU-Bills
| Type | 3-month EU-bill | 6-month EU-bill |
| Maturity | Jan 10, 2025 | Apr 4, 2025 |
| Amount | E1.276bln | E1.745bln |
| Target | E1.5bln | E2.0bln |
| Previous | E1.362bln | E1.688bln |
| Avg yield | 3.094% | 2.979% |
| Previous | 3.149% | 2.973% |
| Bid-to-cover | 1.44x | 1.57x |
| Previous | 2.17x | 1.52x |
| Previous date | Oct 02, 2024 | Oct 02, 2024 |
OUTLOOK: Price Signal Summary - GBPUSD Bear Cycle Remains In Play
- In FX, a bear cycle in EURUSD remains intact. Note that moving average studies are shifting to a bear-mode position, reinforcing the current trend condition. A recent double top reversal pattern on the daily chart also highlights a bearish theme. Sights are on 1.0881, a Fibonacci retracement and the next important support. It has been pierced, a clear break would open 1.0778, the Aug 1 low. Initial firm resistance is at 1.1009, the 20-day EMA.
- The short-term trend condition in GBPUSD is trading lower today, marking the end of the recent consolidation phase. The break lower also confirms a resumption of the current bear cycle. Note that an important support at 1.3002, the Sep 11 low, has been breached. This also reinforces the bear theme and opens 1.2959, 61.8% of the Aug 8 - Sep 25 bull leg. On the upside, initial resistance to watch is 1.3151, the 20-day EMA.
- USDJPY is unchanged and bulls remain in the driver’s seat. The pair is holding on to its recent gains. The latest rally resulted in a break of the 50-day EMA, a bullish development that undermines a recent bearish theme and highlights a stronger reversal. Sights are on 150.76, the 50% retracement of the Jul 3 - Sep 16 bear leg. Initial firm support to watch is 146.82, the 20-day EMA.
