US HEALTHCARE: UnitedHealth: Reaffirms Guidance
(UNH; A2 Neg/A+ Neg/A Neg)
Reaffirms FY25 EPS Guidance and Updates Membership in Star Plans for FY26. Slight Credit Positive
- UNH reaffirmed their FY25 EPS guidance ahead of several investor conferences. This guidance was initially discussed with 2Q25 earnings results and calls for EPS of "at least $16/share" versus Bloomberg consensus estimates of $16.24 and a medical care ratio of 89.25% +/- 25bps.
- While not increasing guidance, we think UNH's affirmation gives investors a small sense of relief that medical care costs haven't worsened so far in 2H25.
- The Company also detailed expectations that approximately 78% of its Medicare Advantage members are expected to be in 4-star plans or higher for FY26. This is consistent with UNH's previous expectations but this figure hasn't been publicly discussed prior to today.
- Given CMS' reimbursement model and bonus payments for quality plans (4-stars or higher), this could have a positive impact on UNH's results for FY26 given it has ~8mm Medicare Advantage members.
- Recall Medicare Advantage had been the problem segment for UNH in FY25 and investors will likely view this news as somewhat of a clearing event for FY26 results (note this will not impact results in 3Q25 or 4Q25).
- Given CMS' reimbursement model and bonus payments for quality plans (4-stars or higher), this could have a positive impact on UNH's results for FY26 given it has ~8mm Medicare Advantage members.
- We view this news as an incremental positive for the UNH credit but note there are still several headwinds facing the Company (increasing medical costs, DoJ investigations, etc). UNH remains on Negative Outlook at all three rating agencies and we wouldn't expect any clarity on those Outlooks until post-4Q25/FY25 results.
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
