EU CONSUMER STAPLES: Sudzucker; FY25 (to March) results (x2)
(SZUGR; Baa2 Neg/BBB Neg)
We said we would circle back on RV. Equities are unphased by the FY25 (to Feb) beat yesterday - they rallied +12% YTD, already trade on expensive multiples yet got no upgrade to this years/FY26 guidance yesterday.
For credit, as we said we do expect both raters to downgrade. If they stay on neg/or stable there will depend on where this most recent beat has come from (ex. Sugar we would see as better). We will get details on that in 2-months/15-May.
Re. levels €32s have been on a one-way move tighter (-38bps), and given retail denominations we would caution attempting to fight that. It is the widest curve alongside the Metro 30s in IG retail giving 20bps over Fraport and Lufthansa. Retail will likely continue pricing it to ratings so we will either need to wait till HY risk is in-sight or for sugar prices to face sharper/continued falls.
Latter can be a mover given its FY26 (lacklustre) guidance is modelled on "the assumption that the EU sugar price level, which has been significantly reduced since October 2024, will improve considerably from the 2025/26 sugar marketing year (October 2025 to September 2026)."
Numbers from yest; https://mni.marketnews.com/4igPAbg
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SWITZERLAND: USDCHF Consolidating Below 50-day EMA
USDCHF exhibited sharp weakness late last week, as greenback sentiment was driven by softer US PPI details & weak retail sales data, and the Swiss Franc was bolstered by stronger-than expected January core CPI figures. USDCHF has been consolidating the break of its 50-day EMA, an average that provided significant support since the US election.
- Swiss Q4 GDP growth came in above expectations this morning, bolstering the renewed CHF optimism, alongside indications that long USDCHF positions have recently been trimmed, according to latest CFTC data.
- Broader dollar optimism has been waning in recent sessions, with tariff announcements being viewed rather as a negotiating tool and potentially questioning the pre-election pledges of the Trump administration. Furthermore, Ukraine peace talks starting to take shape have helped major equity indices maintain their elevated levels, providing an additional headwind for the USD.
- The bearish threat for USDCHF remains evident, and further weakness would initially target 0.8965, the January low. A break would open a cluster of lows around 0.8920 seen last December. Initial resistance is now seen at 0.9065, the 20-day EMA.
EUROZONE ISSUANCE: BTP Piu Retail Orders Hit E5.6bln On First Day
- At the end of the first day, books on the retail-only Feb-33 BTP Piu transaction (ISIN: IT0005634792) were E5.6bln according to Reuters reporting of Bourse data.
- For comparison, first day sales for the March 2024 6-year BTP Valore launch were E6.44bln (35% of the eventual E18.3bln raised). Meanwhile, sales for the May 2024 6-year BTP Valore launch were E3.70bln (33% of the eventual E11.2bln raised).
- Assuming day 1 sales make up ~34% of the total BTP Piu issuance, this suggests E16.5bln will be raised across the week.
- The BTP Piu will form part of the BTP Valore family and will include an option for an early redemption after 4 years as well as a step-up coupon. The minimum coupon rates are 2.80% for years 1-4 and 3.60% for years 5-8.
- Unless there is an early close, books for the BTP Piu will close on Friday at 1300CET.
ECB: Holzmann Sees “Some” Probability Of March Cut, Markets At 98%
- ECB’s Holzmann, a pre-eminent hawk and with a voting role at the March meeting, has been reported on newswires as saying there’s “some” probability of a March rate cut.
- “Some” is at odds with the market where OIS has another 25bp cut as 98% priced.
- He goes on to add that decisions in favor of more cuts are “getting harder”.
- His comments are the closest to pushback on this market pricing ahead of the March decision just over 2 weeks away.
- See our weekly summary of ECB Speak published earlier today: https://media.marketnews.com/250217_Weekly_ECB_Speak_Wrap_3f23c8ea91.pdf
