EU CONSUMER CYCLICALS: Consumer & Transport: Week in Review

• USD2bln WNG of the new 3.75% 5-year Sep-30 ESM-Bond
• Spread set earlier at SOFR MS+39 (SA 30/360) (guidance was SOFR+40 Area, IPT was MS+42 area, that was equiv. to CT5 + ~7.3bp)
• Books closed in excess of $13.3bn excl. JLM interest
• Reoffer 99.855 to yield 3.782%
• Issuer: European Stability Mechanism (TICKER: ESM)
• Issuer Ratings: Aaa (stable) (Moody's) / AAA (stable) (S&P) / AAA (stable) (Fitch)/ AAA (stable) (Scope)
• Format: Registered Notes, Reg S (NSS) / 144A
• Ranking: Senior, Unsecured, Unsubordinated
• Listing: Luxembourg
• Settlement: 4 September 2025 (T+6 (TARGET) / T+5 (NY))
• Maturity Date: 4 September 2030 (5Y)
• HR 101% vs CT5 (T 3 ⅞ 07/31/30 )
• ISIN: Reg S: XS3171756128 / 144A: US29881WAG78
• Coupon: 3.75%, Fixed, Semi-annual, 30/360, Following, Unadjusted
• Bookrunners: CACIB(DM/B&D) / DB / JPM

The transaction comes ahead of a USD3bln redemption for the ESM in September. That line also had a 5-year maturity initially.

• 4,000 SOFR White packs (SFRU5-SFRM6) +0.000 at 1037:12ET - likely swap-tied sale with spds running wider in the short end

Elsewhere, multiple analysts now see a cut in September whereas previously they'd seen one later in 2025.

• Deutsche pulled forward their next-cut call from December to September (but still see a December cut).
• Barclays also pulled forward their view for the next cut to September.
• Natixis appears to have shifted its view for the next cut in October to be pulled to September "from this early juncture we think a September hawkish ease is more likely than not (assuming a 25bp cut), but there is still a great deal of time, and data, between now and the September FOMC meeting".
• SocGen likewise ("Previously, our base case was just one 25bp cut, and late this year (October or December). However, a rate cut at the next FOMC in September now looks an above 50% probability.")
• RBC isn't yet convinced of a cut before December: "While the odds of a rate cut next month are high, we aren’t yet convinced it is a slam dunk."