CONSUMER STAPLES: Walgreen Boots; headlines on VillageMD restructuring continue

Feb-13 13:58

(WBA: B1/BB-; Stable) 

  • WBA making Bloomberg's 'US distress daily'. Fortunately its in reference to the loss maker VillageMD clinics, bankers prescribed to figure out what to do with it, as has been the case for some time now. WBA ploughed $6.2b into it post-Covid to build a 63% stake with hopes it would build out and diversify its bottom line - ones that have since, likely, vanished.
  • €26s have rallied into Z+190, we continue to be cautious till we see Q2 results and would note negative updates for short-end liquidity, namely that ex. the liquidated $300m Cencora stake remaining is tied in prepaid forward contracts (cash already received) and a $988m court verdict against it.

Historical bullets

FRANCE: PM Bayrou Set To Speak At 1400GMT/1500CET

Jan-14 13:58

PM Bayrou’s general policy speech can be viewed at this link

  • French media outlets reported earlier today that Bayrou told parliamentary leaders of the gov't parties that he does not intend to announce a suspension of the 2023 pension reforms, instead favouring renegotiation in order to reach an agreement by September 2025.
  • The centre-left Socialist Party (PS) has talked up a suspension of the reforms as its price for supporting the gov't in a post-speech censure vote.
  • Should Bayrou's middle-ground approach on pension reform fall short of PS demands then it remains to be seen whether the Bayrou gov't can last.

BUNDS: The German 10yr makes an attempt at the July high

Jan-14 13:55

A quick turnaround for Bund, after initially gaining few Ticks on the US PPI miss, the German 10yr Yield is again eyeing a test to the July high of 2.642%, would need a test towards ~130.47, so far just tested a 130.53 low.

US DATA: PCE Components Of PPI Largely Benign, Outside Of Airfares Jump

Jan-14 13:55

Mixed developments in key categories from a PCE perspective, all figures % M/M:

  • Airfares +7.2% (after -1.6%), highest since March 2022
  • Auto insurance -0.2% (after +0.20%), lowest since Feb 2023
  • Portfolio management 0.2% (after -0.6%)
  • Medical care 0.2% (after 0.3%)
  • Healthcare services 0.0% (after 0.0%)
  • If anything it looks as though most PCE components are on the soft side with the notable exception of airfares, which typically jump in December. Note these figures are not seasonally adjusted, but the airfares figure is still very high.
  • We would take this chart with a grain of salt given there will be a sizeable downward seasonal adjustment to the airfares figure, but it illustrates that apart from that volatile category, the PPI report was fairly benign from a PCE translation perspective. (One of the few PPI airfare estimates we saw was from Nomura, which saw +1.8%, vs the +7.2% actual.)
  • We await updated December PCE estimates which came into today centered on 0.20% M/M.
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