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Carrefour (CAFP; Baa1, BBB; S) {CA FP Equity} 1Q results

CONSUMER STAPLES
  • We didn't see rating risk on still healthy cash balance, but acquisitions as shortcut to grabbing market share on ongoing French market competition is still a possibility.
  • Switches out of 30/31s into 2-notch lower Tesco 31s for +27bp spread pick up screen cheap here. Tesco 29/31 flatteners still the preferred expression.
  • As a aside read-through is not positive for Elo/Auchan but its curve is priced to the wides. Basis has moved out again after new issue linked secondary sell-off; now at -60 after a high of -30bps. Ignoring funding costs theoretically risk free carry there is eqv. of carrefour's outright 5yr carry. No view on basis to come back in though.
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  • We didn't see rating risk on still healthy cash balance, but acquisitions as shortcut to grabbing market share on ongoing French market competition is still a possibility.
  • Switches out of 30/31s into 2-notch lower Tesco 31s for +27bp spread pick up screen cheap here. Tesco 29/31 flatteners still the preferred expression.
  • As a aside read-through is not positive for Elo/Auchan but its curve is priced to the wides. Basis has moved out again after new issue linked secondary sell-off; now at -60 after a high of -30bps. Ignoring funding costs theoretically risk free carry there is eqv. of carrefour's outright 5yr carry. No view on basis to come back in though.