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Thames Water (Baa3): Bear Flattening

UTILITIES

• THAMES 4 27, the highest cash price € outstanding, continues to underperform. ~65 wider today with the next worst 28s ~20 wider.

• Prices are converging on SAR fears leading to a debt haircut, with 15-25 points mooted to bring regulatory gearing down to 55%.

• The 27s at ~89.30 Z+518 vs 31s at ~87.10 Z+410 presents interesting risk reward dynamics, with > 100bp (2.5+ pts) upside on a normalisation.

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