US CREDIT RATING: Paramount Skydance: S&P Rating (From last night)
• S&P assigned a 'BB+' ICR to the new parent Paramount Skydance Corp with a stable outlook, and the ratings on the company’s debt are unchanged.
• The stable outlook reflects S&P’s view that Paramount will reduce leverage to <4.25x and improve its FOCF/debt to >6% in the coming 12 months driven by an increase in earnings from growing streaming segment profitability, cost and revenue synergies, and debt repayment.
• S&P has not yet incorporated Skydance businesses, expectations for synergies, or the impact of management’s new strategy and financial policy into this forecast.
• S&P notes that the new ownership seeks to prioritize reducing risk in the company’s capital structure and improve cash flows.
• Downgrade criteria: If PSKY is unable to reduce its leverage <4.25x and increase its FOCF/debt >5% over the next 12-18 months.
• Upgrade Criteria: If PSKY reduces its leverage <3.5x and generates FOCF/debt of sustainably >10% and shows at least revenue and EBITDA stability. The company could lower leverage metrics through a capital infusion and debt repayment.
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FOREX: GBPUSD Approaching Key Short-Term Support Amid Dollar Recovery
- Broader dollar strength has been extending into the NY crossover on Wednesday, as political concerns in Europe provide a moderate risk-off tone and post JH Powell positions are squeezed.
- This is contributing to GBPUSD also fully reversing the Powell induced move, although last Friday’s lows remain untested for now. This level at 1.3391 marks a key short-term support for the pair, of which a break would signal scope for a move towards 1.3315, the 61.8% retracement of the Aug 1 - 14 bull leg.
- Trendline support drawn from the year’s lows would then come back into focus, of which a breach may threaten the broader medium-term uptrend that has been evident this year. JP Morgan remain of the view that investors should be using any GBP rallies to set up bearish multi-month exposure covering the UK budget.
- JPM point out that what stood out last week is the lack of GBP strength on strong PMI and inflation data, which suggests focus may be on long end gilts and pressure on the chancellor. Sticky inflation, critiques on UK tax policy options and UK yield moves all add to UK government funding gap woes heading into the autumn budget. As part of JPM’s macro trade recommendations, they suggest keeping GBP shorts vs EUR, CHF, NOK & SEK.
SEK: SEB: Neutral Month-End Rebalancing Outlook
SEB’s model suggests that month-end rebalancing needs for the typical Swedish portfolio manager are SEK neutral.
OUTLOOK: Price Signal Summary - Resistance In Bunds Remains Intact
- In the FI space, Bund futures continue to trade above their recent lows. A bear threat remains present. The contract recently breached 128.84, the Jul 25 low and a bear trigger. Note that the 129.00 handle represents the base of a broad range. A clear range breakout would strengthen a bearish theme. This would open 128.40 initially, the Apr 9 low. Strength above the 50-day EMA of 129.78, is required to signal a reversal.
- A bear cycle in Gilt futures remains in play and yesterday’s fresh cycle low reinforces current conditions. Note that on the continuation chart, moving average studies are in a bear-mode position, highlighting a clear downtrend - for now. First support to watch is 90.25 (pierced), the Aug 26 low. A clear break of it would resume the bear leg and open the 90.00 handle. Initial resistance is at 91.24, the Aug 18 high.
