US CREDIT SUPPLY: Elevance Health: 4 Part Deal (3YR, 7YR, 10YR, 30YR)
Sep-08 14:34
ELV (Baa2/A/BBB+)
- 3YR IPT +80 area / FV: +55 area
- 7YR IPT +110 area / FV: +80 area
- 10YR IPT +125 area / FV: +95 area
- 30YR IPT +135 area / FV: +110 area
- Format: SEC registered, senior unsecured
- UOP: Repay various notes, working capital and GCP
- Bookrunners: Active: BofA, DB, MIZ
- Elevance is in the market to repay maturing bonds (5.35% 25's and 4.9% 26's) as well as fund working capital and GCP.
- Please see the following link for our thoughts on ELV's 2Q25 earnings results.
- Elevance ended 2Q25 with debt/cap leverage of ~40.8% and we would expect leverage to end FY25 in a similar range (Moody's has leverage slightly higher at 41.4%). We note that ELV's leverage has increased over the last few quarters due to rising claim costs in FY24 and YTD'25. ELV noted in 2Q25 they expect the medical care ratio to be ~90% for FY25 which is up from 88.5% in FY24 and above their previous guidance. We do note, ELV reaffirmed their FY25 guidance at a recent investor conference which was about one month after 2Q25 earnings.
- Health Insurers have had a tough 1H25 given the increase in medical claims and rising claim costs. Many of the large insurers have seen medical care ratios close to 90% and we expect it to take another year or two for the group to push through higher pricing to offset these rising claims.
- We think Cigna is the best comp for Elevance given the similar ratings profile; however, we note ELV is more exposed to the rising medical claims given its mix of full-risk insurance in the Commercial segment (whereas Cigna has more ASO clients which are significantly less risky). Given this factor and spreads that are roughly flat to each other, we think Cigna offers more compelling value during this challenging time for the sector.
- Health Insurers are trading wide to the Index and well wide of similarly-rated Pharma and Healthcare names. Health Insurance is a long-cycle business as it takes 1-2 years to push through price increases in light of higher medical claims and higher claim costs. Given this opportunity in the Health Insurer space, we still think Cigna and CVS are better positioned to benefit than Elevance.
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
Aug-08 22:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
Aug-08 20:14
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Aug-08 20:08
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
