EU CONSUMER STAPLES: Kraft Heinz | evaluating 'strategic transactions'
(KHC; Baa2/BBB; Stable)
"Consistent with this goal, over the past several months we have been evaluating potential strategic transactions to unlock shareholder value.” - CEO
• Sales are off to a rough start (-5% in 1Q), with weak FY guide of -1.5% to -3.5%.
• Leverage headroom and above-peer margins limit near-term credit pressure.
• If a divestment materialises (e.g. the Oscar Mayer rumour that didn’t last year), the credit impact hinges on use of proceeds.
Presser: https://tinyurl.com/2xethnn6
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EQUITIES: US Cash Opening calls
SPX: 5,430.5 (+2.7%); DJIA: 40,010 (+2.1%/+823pts); NDX: 18,862.3 (+3.2%).
US TSY OPTIONS: Early Volatility Buyer
- +7,500 TYM5 111 straddles, 156
- 2,000 TYN5 109/114 strangles ref 111-10
- 1,058 FVM5 108.5/109.5/110.5 call flys ref 108-12
- +1,000 FVK5 108.25/108.5 strangles, 18.5 ref 108-11.75
BONDS: Gilt Bulls Unable To Force Break Below 200bp Vs. Bunds
The combination of beta to Tsys, this morning’s gilt remit revision and softer-than-expected UK PMI data has driven gilt outperformance vs. Bunds, with the UK/German 10-Year yield spread ~8bp tighter on the day at 202bp.
- The spread currently trades around the middle of its year-to-date range (177-227bp, based on closing levels).
- Gilt bulls were unable to force a break below 200bp, with the spread basing at 200.4bp around 12:00 BST.
- Gilt bulls have not managed to push the spread back below the 200bp mark since the break above on April 9.
- Potential meaningful reallocation flows out of Tsys have made the spread particularly difficult to trade in recent weeks, as have a couple of instances of reduced liquidity further out the UK curve.
- Outside of the intraday noise, longer term focus continues to fall on relative fiscal outlooks, with the UK already experiencing limited fiscal headroom, while Germany has pledged meaningful fiscal expansion, which is set to drive an uptick in issuance over the medium-term.
