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EDF (Baa1/BBB): ESG Impact

UTILITIES
  • It was reported on Monday that EDF will produce radioactive material needed to maintain France’s nuclear weapons.
  • There was no initial spread reaction, until yesterday afternoon when € bonds moved ~12 wider.
  • The move seems ESG driven, with weapons exposure likely to impact scores negatively.
  • The slow move reflects the unusual nature of the impact being ESG rather than credit fundamentals. Although perhaps not obvious at first glance, EDF bonds may see reduced future demand and the market needs to discount that.
  • $ bonds were 2-7 wider with the average at the tighter end of that range. Assuming Europe is more ESG sensitive than the US, this would seem to support the thesis.
  • Spreads are broadly unchanged this morning.

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