03 September 2018 by lberuti
It was a predictably slow start to the week with the US out of the office today. Generally speaking, there was not a great deal of momentum on indices, but some of the names that kept market participants on their toes last week kept moving. Among them was COFP ( Casino Guichard Perrachon SA ), which got downgraded by one notch by S&P from BB+ to BB . Last week, the company’s 5-year risk premium widened by 125bps to 588bps. While it was roughly stable today, the curve inverted as investors pushed short dated risk premia meaningfully wider. On a running spread basis, 1-year, 2-year and 3-year risk premia are trading at wider levels than the 5-year risk premium. This inversion of the curve is basically showing that investors are seriously questioning the accounts of the company. At “face value”, there should not be any shortfall of liquidity compared with the uses over the next few years. Despite Mr Lubek’s – COFP deputy financial officer - best effort – he was on TV today -, his message is not getting across.