EU CONSUMER STAPLES: Mars: $25-30b may come this week (x7)
Mar-05 14:23
(MARS; A2 Stable/A Stable) (K; Baa2 CW Pos (exp. A2)/NR/A stable now)
- $Bmrk: 2y, 3y, 5y, 7y, 10y, 20y, 30y, 40y
- 144a/Reg S, 2k denominations, 101 SMR if deal not closed by Aug '26
Indications are the full refi will be done in $s (~$26b). Based on Bloomberg data it will be the 8th largest deal.
- Implications for Kellanova €29s/34s (now Guaranteed by Mars, consent for doc change out), is a clear scarcity premium. It trades well away from now A-flat ratings (after a 3-notch upgrade).
- Some discount may be warranted for the co's private nature, but this is still one of the largest confectionary co's (~$70b in revenue) and despite its roots, is 60% exposed (pro-forma 50%) to pet-care. This includes petfood brands like Pedigree and Whiskas and animal hospital chains like Banfield and VCA in the US. The exposure is welcome given the segment (vs. snacking) is seen having stronger growth prospectus (Nestle & GIS are other conglomerates with Pet exposure).
- €34s have been trading (in smalls). We do see value.
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GILTS: /SWAPS: BofA Tweak Recommendations Ahead Of BoE
Feb-03 14:11
Bank of America outline a couple of trades “for those keen to continue the curve steepening theme - perhaps wishing to position for the possibility that the market focuses on the BoE's 2y- and 3y-ahead inflation forecasts next week (which we expect to be lowered).”
- They maintain their 3s5s7s swap fly position (targeting a move to 10bp, stop set at -21bp).
- Elsewhere, they still “think 5-Year real rates need to be higher than priced to combat inflation but now see that being delivered via lower-than-priced inflation.” As a result, they have switched their “bearish real rate bias into a bearish RPI view in the 5-Year area.”
USD: Grassely 'Pleads' For Potash Exemption From Canada Tariffs
Feb-03 14:09
Senator Chuck Grassley (R-IA), one of the senior-most members of the Senate Republican conference, has "pleaded" with President Donald Trump to exempt potash from tariffs levied on imports from Canada.
- Grassley said in a message on X: "Biden inflation increase the input cost to farming by 20% incl particularly high prices on fertilizer. So I plead w President Trump to exempt potash from the tariff because family farmers get most of our potash from Canada"
- The message is a sign that Trump's tariff agenda may burn significant political capital with Republicans from agricultural and manufacturing states, likely to bear the brunt of Trump's tariffs and retaliatory actions from targetted countries.
- Former Senate Republican Leader Mitch McConnell (R-KY), a regular adversary of Trump, said on Sunday: “[Tariffs] will drive the cost of everything up. In other words, it will be paid for by American consumers. Why would you want to get in a fight with your allies over this?”
- Axios notes that Senate Majority Leader John Thune (R-SD) said in August that he is against "across-the-board tariffs” but is open to the selective use of tariffs.
- As a reminder, the power of the executive is limited. For durable legislative change, Trump needs to keep Republican lawmakers onside. Any major revolt from agricultural state Republicans will put the entire GOP agenda at risk.
STIR: Effective Fed Funds Rate
Feb-03 14:07
- FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $83B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $227B
- Earlier Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.38% (+0.02), volume: $2.533T
- Broad General Collateral Rate (BGCR): 4.34% (+0.00), volume: $918B
- Tri-Party General Collateral Rate (TCR): 4.34% (+0.00), volume: $892B
- (rate, volume levels reflect prior session)
