Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Local IG tobacco names - BAT (Baa2 Pos, BBB+), PM (A2, A-; S) & Imperial (Baa3 Pos, BBB, BBB) - have posted a strong rally & are among the best performers in consumer staples this week; BAT (€ lines -5 to -20bps tighter), PM (unch to -30bps), Imperial (-10 to -20bps) vs. €IG Consumers' -2bp move.
Given no notable change in any of their equities & only affirmations of already announced guidance (PM at CAGNY conference) we assume investors are continuing to come in for the spread pick up compressing the tobacco discount.
BAT's performance in the particular is interesting - its continuing to compress to PM despite expected divergence in headline performance ahead - as we've mentioned tailwind from deleveraging may be limited now (its already in target). We've seen some analyst point to potential rating upgrades - we don't think uplift is in the horizon for BAT - S&P only gave it a outlook revision (to stable) last week in reaction to it reaching target. The BAT/PM compression is also one that's not mirrored in $ curves (yet).
Outside of the BAT/PM dynamic, we are more broadly cautious on Tobacco curves - BAT in particularly has shown a high beta on broader spread sell-offs (i.e. underperformance) despite being rated in-line with index avg's at A3/Baa1. For investors still looking to clip a Tobacco discount, belly PM (29/31's) screen as the cheapest to us.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.