US CREDIT UPDATE: Kraft Heinz Co (KHC): WSJ Reports Breakup Could Be Imminent
Kraft Heinz Co: WSJ Reports Breakup Could Be imminent
(KHC; NR/BBB/BBB)
#MNI #Consumer
• WSJ reporting that a breakup could happen as early as next week.
• The move would undo the 2016 marriage of the two companies steered together by Warren Buffet and 3G Capital. • KHC’s current market cap is $33b and the spinoff would be part of an effort to unlock shareholder value.
• KHC had reported in May that it was considering its strategic options. Press reports from earlier this summer had KHC spinning off its grocery business into a company with perhaps a $20b market cap, leaving it with a company focused on condiments and sauces,
• The move is part of a trend in the food segment. Kellogg spun off Kellanova in 2023 and Keurig Dr Pepper recently announced a transaction that includes the spinoff of its coffee operations.
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US 10YR FUTURE TECHS: (U5) Fades on Fed
- RES 4: 112-15 61.8% retracement of the Apr 7 - 11 sell-off
- RES 3: 112-12+ High Jul 1 and a bull trigger
- RES 2: 111-28 High Jul 3
- RES 1: 111-14+ High Jul 22 & Jul 30
- PRICE: 110-31+ @ 20:21 BST Jul 30
- SUP 1: 110-19+/08+ Low Jul 24 / Low Jul 14 & 16
- SUP 2: 110-03 76.4% retracement of the May 22 - Jul 1 bull leg
- SUP 3: 109-28 Low Jun 6 and 11
- SUP 4: 109.25 Low May 27
Treasury futures traded higher Tuesday, but faltered into the Wednesday close on the Fed decision. Recent gains resulted in a break of the 20-day EMA, strengthening the recovery that began mid-July. Note too that resistance at 111-13+, the Jul 10 high, has been pierced. A clear break of it would highlight a stronger reversal and open 111-28, the Jul 3 high. Key support is 110-08+, the Jul 14 and 16 low. Clearance of this level would reinstate a bearish theme. First support is at 110-19+, the Jul 24 low.
FED: Rough Transcript of Chair Powell's July Press Conference
Rough Transcript of Fed Chair Powell's post-July FOMC press conference is here(PDF)
STIR: Hawkish Adjustment Extended Through Presser, 50/50 Sept Cut Odds
- The hawkish reaction in Fed rates extended throughout Powell’s conference, comfortably more than reversing the small dovish reaction to the initial decision statement.
- Fed Funds cumulative cuts from 4.33% effective: 12.5bp Sep (vs 16bp pre-Powell and 15.5bp pre decision), 21.5bp Oct, 37.5bp Dec (vs 44bp per decision), 46bp Jan and 58bp Mar (vs 65bp pre decision)
- Largest increases in SOFR implied yields through Powell’s press conference are in the H6, +8bp for the same move on the day and +5.5bp since the FOMC decision.
- The terminal implied yield remains in the H7, at 3.225% (+5.5bp on the day) but still easily within the 3.1-3.3% range seen through July.
- The moves were initially driven by Powell seeing modestly restrictive policy as appropriate, saying we have made no decisions about the September meeting and we’re still a ways from seeing where things settle down. Adding to this rhetoric, he later said it’s really hard to say whether will have enough information to cut in September.
