EU COMMUNICATIONS: Netflix Curve Tightens On Strong Report
Jan-22 09:38
Netflix curve is 3-5bps tighter following last night’s earnings.
- Not many good direct €IG comps for Netflix. Entertainment names WBD, WMG, UNIMUS are the closest though are lower rated and don’t face the same growth dynamics. CMCSA operates a streaming service though it’s a smaller part of the business.
- The curve still screens as attractive vs. the BVAL single-A corps curve with high growth rates that many names this highly rated lack and given rating upside.
- The Moody’s upgrade seems a given; we also think further upside exists over the LT - S&P double-notch upgraded over the summer so the bar is quite high but it’s clear that Netflix is moving in the right direction.
- S&P are looking for growth over 10% (already baked into expectations with this report to drive consensus upgrades) with an op margin towards 30% (again baked into consensus) while maintaining leverage <1x and avoiding more aggressive FinPol.
- We calc gross/net EBITDA leverage 0.1x lower to 1.5x and 0.6x (no view on adjustments) and note that Netflix is prioritising internal growth via content spend as opposed to acquisitions. Payouts are to increase but will presumably be funded via FCF with minimal leverage impact in line with recent policy.
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STIR: Just Under 120bp Of '25 ECB Cuts Priced
Dec-23 09:08
ECB-dated OIS shows ~118bp of cuts through ’25 vs. ~119bp late on Friday, while Euribor futures are 0.5-3.5 lower.
- Some are attributing the modest hawkish repricing to comments made by ECB President Lagarde.
- Lagarde told the FT that “we’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%. I’m saying that with a little reservation because I still believe that we should be very vigilant about services.”
- While the caution surrounding services inflation is worth noting, it isn’t a new source of information and has factored heavily into discussions at various stages of the ECB’s current easing cycle. She also stressed the progress towards the Bank’s inflation goal.
- As such, we don’t think this should be a major driver for STIR repricing, with weakness on EGB curves seemingly more of a driver when it comes to this morning’s moves.
- Elsewhere, ECB GC member Makhlouf reiterated his preference for 25bp cuts (pointing to heightened uncertainty in ’25).
- Meanwhile fellow GC member Vujcic stressed that the direction of policy rates is clear (signalling further cuts), noting that the evolution of data and degree of policy transmission will determine the longevity of the Bank’s cutting cycle.
- Little of note on the European calendar for the remainder of the week, which will leave focus on macro headline flow.
- A reminder that the Christmas holiday period will result in adjusted hours and closures as well as reduced liquidity and volume.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Jan-25 | 2.637 | -27.9 |
Mar-25 | 2.325 | -59.1 |
Apr-25 | 2.079 | -83.8 |
Jun-25 | 1.915 | -100.1 |
Jul-25 | 1.849 | -106.8 |
Sep-25 | 1.796 | -112.0 |
Oct-25 | 1.769 | -114.8 |
Dec-25 | 1.733 | -118.3 |
EURIBOR OPTIONS: Upside ERG5/ERF5 Structure Lifted
Dec-23 09:04
2x ERG5 98.25 calls lifted vs. 1x ERF5 97.87 calls, with paper paying 1.0 on 6.25K for the G5. ERH5 last 97.705.
FOREX: EUR Edges Lower, But FX Ranges Largely Contained
Dec-23 08:53
Moving inline with the weakness for European bonds, the single currency has edged lower to be the session's poorest performer, although price action remains muted and ranges well contained.
- Having traded 0.8315 overnight, EUR/GBP is back to negative on the day - having reversed ahead of any test on the 50-dma at 0.8319 - a level markets have failed to break on three occasions in the past week or so.
- EUR/NOK is lower for a second session, extending the reversal off the post-Norges Bank high to just over 1%. Rate is now meeting support at the confluence of the 50-, 100-dmas of 11.7666/65.
- The greenback is more mixed. The USD Index is very mildly higher, but is holding the majority of Friday's slippage - leaving 108.541 the key level ahead.
- As a gauge of lighter volumes and limited liquidity today: EUR futures have traded volumes ~20% below average for this time of day, GBP ~50% lower and JPY ~40% lower.
