Relative value insights

Dislocation in JPM vs BofA

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Dislocation in JPM vs BofA

Dislocation in JPM vs BofA

January 18, 2021
BUY

JPM 2 83/1000 22/04/2026

US46647PBK12
SELL

BAC 3 93/1000 01/10/2025

US06051GGT04

Related reports:

The spread between JP Morgan 2.083% 2026 (JPM 26's, A) and Bank of America 3.093% 2025 (BAC 25's, A) has increased to its highest level. While JPM 26's have on average traded under BAC 25's, it currently trades 10bps wider (2.8 standard deviations). Holders of BAC 25's have the opportunity to take profits at 38bps and switch into the JPM 26's at 49bps, increasing carry and potentially generating alpha were the spread difference to return to the mean.

A Trader's View

Katana Labs
,
July 8, 2020

HCOB'22 vs SOCGEN '22 - 08.07.20

Katana Labs
,
June 25, 2020

European Financials 25.06.20

Trade ideas

Dislocation in US Utilities

Dislocation in US Utilities

March 3, 2021
BUY

ATO 4 3/10 01/10/2048

US049560AP00
SELL

SO 3 7/10 01/12/2047

US010392FR41

Related reports:

The spread difference between Atmos Energy Corporation 4.3% 2048 (ATO 48's, A-) and Alabama Power Company 3.7% 2047 (SO 47's, A+) is at its highest. Over the last week ATO 48's have widened while SO 47's have remained stable. The difference in spread is now 19bps vs an average for the year of 1bp (2.7 standard deviations). Holders of SO 47's have the opportunity to take profits at 123bps and switch into ATO 48's at 142bps.

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Curve Steepening in Anheuser-Busch InBev

Curve Steepening in Anheuser-Busch InBev

February 26, 2021
BUY

ABIBB 4 5/8 01/02/2044

US03524BAF31
SELL

ABIBB 4 7/20 01/06/2040

US035240AS95

Related reports:

The credit spread between Anheuser-Busch InBev Finance 4.625% 2044 (ABIBB 44's, BBB+) and Anheuser-Busch InBev Worldwide 4.35% 2040 (ABIBB 40's, BBB+) is at its highest. The spread on ABIBB 44's has widened steeply while ABIBB 40's have remained stable. The difference, which on average has been 24bps in the year has increased to 47bps (2 standard deviations). Holders of ABIBB 40's have the opportunity to take profits at 140bps and switch into the ABIBB 44's at 186bps.

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Steepening of Daimler Finance Curve

Steepening of Daimler Finance Curve

February 25, 2021
BUY

DAIGR 3 3/4 22/02/2028

USU2339CDB10
SELL

DAIGR 3 9/20 06/01/2027

USU2339CCQ97

Related reports:

The spread difference between Daimler Finance North America 3.75% 2028 (DAIGR 28'S, BBB+) and 3.45% 2027 (DAIGR 27'S, BBB+) is at its highest. Since early January DAIGR 27' have been on a tightening trend while DAIGR 28's have remained flat. The difference is currently 30bps against an annual average 7bps (2.1 standard deviations). Holders of DAIGR 27's have the opportunity to take profits at 63bps and switch into DAIGR 28's at 92bps.

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Dislocation in Expedia Curve

Dislocation in Expedia Curve

February 23, 2021
BUY

EXPE 5 0 15/02/2026

US30212PAM77
SELL

EXPEGRO 7 0 01/05/2025

US30212PAV76

Related reports:

The spread difference between Expedia 5% 2026 (EXPE 26's, BBB-) and 7% 2025 (EXPEGRO 25's, BBB-) has been inverted. While EXPE 26's have historically traded through EXPEGRO 25's by as much as 200bps at times, it have been trading marginally cheaper since December. As EXPEGRO 25's have tightened further in the last few days, the difference has now increased to 100bps (2.2 standard deviations). Holders of EXPEGRO 25's have the opportunity to take profits at 49bps and switch into the EXPE 26's at 149bps.

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Apple at its Highest vs Microsoft

Apple at its Highest vs Microsoft

February 22, 2021
BUY

AAPL 2 2/5 20/08/2050

US037833DZ01
SELL

MSFT 4 9/20 03/11/2045

US594918BL72

Related reports:

Apple 2.4% 2050 (AAPL 50's, AA+) is its highest against Microsoft 4.45% 2045 (MSFT 45's, AAA). The spread difference, which has been in -5bps to +5bps range has suddenly spiked to 18bps (3.35 standard deviations). Holders of MSFT 45's have the opportunity to take profits at 83bps and switch into the AAPL 50's at 101 bps.

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Target Cheap vs Comcast

Target Cheap vs Comcast

February 19, 2021
BUY

TGT 2 1/4 15/04/2025

US87612EBL92
SELL

CMCSA 3 7/10 15/04/2024

US20030NCR08

Related reports:

Following the tightening of Comcast Corporation 3.7% 2024 (CMCSA 24's, A-), the spread difference between Target Corporation 2.25% 2025 (TGT 25's, A) and CMCSA 24's has increased to 19bps (2.96 standard deviations). Holders of CMCSA 24's can take profits at 5bps and switch into the better-rated TGT 25's at 24bps.

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Altria Group Cheap vs Anheuser-Busch InBev

Altria Group Cheap vs Anheuser-Busch InBev

February 15, 2021
BUY

MO 5 19/20 14/02/2049

US02209SBF92
SELL

ABIBB 4 1/2 01/06/2050

US035240AT78

Related reports:

The spread difference between Altria Group 5.95% 2049 (MO 49's, BBB) and Anheuser-Busch InBev Worldwide 4.5% 2050 (ABIBB 50's, BBB+) has increased from a range of 40-60bps to 71bps (2.5 standard deviations). Holders of ABIBB 50's have the opportunity to take profits on the recent tightening to 170bps and switch into MO 49's at 241bps.

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In the money: 25bps compression in EPD vs MPLX

In the money: 25bps compression in EPD vs MPLX

February 11, 2021
BUY

EPD 4 3/20 16/10/2028

US29379VBT98
SELL

MPLX 4 1/4 01/12/2027

US55336VBN91

Related reports:

The trade idea to buy Enterprise Products Operating 4.15% 2028 (EPD 28's, BBB+) and sell MPLX 4.25% 2027 (MPLX 27's, BBB) has returned 25bps since we posted it a month ago. While MPLX 27's have widened from 89bps to 97bps, EPD 28's have tightened from 93bps to 76bps, taking the difference in spread from 4bps to -21bps.

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Panama vs Mexico

Panama vs Mexico

February 10, 2021
BUY

PANAMA 3 3/4 16/03/2025

US698299BE38
SELL

MEX 4 1/8 21/01/2026

US91086QBG29

Related reports:

We see a dislocation in the spreads of Panama 3.75% 2025 (PANAMA 25's, BBB) and Mexico 4.125% 2026 (MEX 26's, BBB). PANAMA 25's have historically traded through the MEX 26's but the difference has recently inverted and currently PANAMA 25's are trading 28bps wider (2 standard deviations from the rolling mean). Holders of MEX 26's have the opportunity to take profits on the recent tightening at 45bps and switch into the PANAMA 25's at 73bps.

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Harley-Davidson Financial Services Cheap vs GM Financial Company

Harley-Davidson Financial Services Cheap vs GM Financial Company

February 9, 2021
BUY

HOG 3 7/20 08/06/2025

USU24652AT35
SELL

GM 4 0 06/10/2026

US37045XBQ88

Related reports:

Katana identifies a dislocation in the spread between Harley-Davidson Financial Services 3.35% 2025 (HOG 25's, BBB) and General Motors Financial Company 4% 2026 (GM 26's, BBB-). HOG 25's have historically traded through GM 26's, but in a general spread tightening trend the difference has narrowed and became positive since the beginning of February. The spread difference has increased to 30bps (2.2 standard deviations from the rolling mean). Holders of GM 26's have the opportunity to take profits at 84bps and switch into the HOG 25's (1 notch better rated) at 115bps.

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Dislocation in Rusal Curve

Dislocation in Rusal Curve

February 5, 2021
BUY

RUALRU 4 17/20 01/02/2023

XS1759468967
SELL

RUALRU 5 1/8 02/02/2022

XS1533921299

Related reports:

The difference in spread between Rusal 4.85% 2023 (RUALRU 23's, B+) and Rusal 5.125% 2022 (RUALRU 22's, B+) has increased sharply and reached 76bps (3.5 standard deviations). Holders of RUALRU 22's have the opportunity to take profits at 274bps and switch into the RUALRU 23's at 350bps.

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Dislocation in A-rated US Financials

Dislocation in A-rated US Financials

February 4, 2021
BUY

CAT 1 9/20 15/05/2025

US14913R2C07
SELL

WFC 3 69/1000 24/01/2023

US949746SK86

Related reports:

Following the sharp tightening of Wells Fargo 3.069% 2023 (WFC 23's, A) the spread difference against Caterpillar Financial Services 1.45% 2025 (CAT 25's, A) has increased to 24bps (2.9 standard deviations). Holders of WFC 23's have the opportunity to take profits at -1bps and switch into CAT 25's at 23bps.

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Dislocation in OTIS vs Vulcan Materials

Dislocation in OTIS vs Vulcan Materials

February 3, 2021
BUY

OTIS 3 14/125 15/02/2040

US68902VAL18
SELL

VMC 3 1/2 01/06/2030

US929160AZ21

Related reports:

The spread difference between OTIS 3.112% 2040 (OTIS 40's, BBB) and Vulcan Materials 3.5% 2030 (VMC 30's, BBB) has increased sharply. It has historically been between 20bps and 35bps and currently has reached 42bps (2.6 standard deviations). Holders of VMC 30's have the opportunity to take profits at 85bps and switch into the OTIS 40's at 127bps.

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Charter Communications Looks Cheap vs Walgreens Boots Alliance

Charter Communications Looks Cheap vs Walgreens Boots Alliance

February 2, 2021
BUY

CHTR 5 3/8 01/05/2047

US161175BL78
SELL

WBA 4 1/10 15/04/2050

US931427AT57

Related reports:

Charter Communications Operating 5.375% 2047 (CHTR 47's, BBB-) is looking cheap against Walgreens Boots Alliance 4.1% 2050 (WBA 50's, BBB). As WBA 50's have tightened, the spread difference has increased to 43bps (2.95 standard deviations). Holders of WBA 50's have the opportunity to take profits at 210bps and switch into CHTR 47's at 253bps.

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ABBVIE Cheap vs Amgen

ABBVIE Cheap vs Amgen

January 29, 2021
BUY

ABBV 4 17/20 15/06/2044

US00287YDA47
SELL

AMGN 4 2/5 01/05/2045

US031162BZ23

Related reports:

ABBVIE 4.85% 2044 (ABBV 44's, BBB) have got cheaper relative to Amgen 4.40% 2045 (AMGN 45's, BBB+). ABBV 44's have historically traded 6-12bps over AMGN 45's but the difference has now widened to 21bps (2.2 standard deviations). Holders of AMGN 45's have the opportunity to take profits at 143bps and switch into the ABBV 44's at 164bps.

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Duke Energy Gets Cheaper than Consumers Energy Company

Duke Energy Gets Cheaper than Consumers Energy Company

January 28, 2021
BUY

DUK 2 1/2 15/08/2050

US26442UAK07
SELL

CMS 4 1/20 15/05/2048

US210518DB95

Related reports:

Duke Energy 2.5% 2050 (DUK 50's, A) has become cheaper than Consumers Energy Company 4.0.5% 2048 (CMS 48's, A+). DUK 50's have historically traded under CMS 48's but the difference has been on an upward trend and recently it got inverted with DUK 50's now trading 4bps wider (2.4 standard deviations). Holders of CMS 48's can take the opportunity to take profits at 114bps and switch into DUK 50's at 118bps.

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Ally Financial Cheap vs GM Financial Company

Ally Financial Cheap vs GM Financial Company

January 27, 2021
BUY

ALLY 1 9/20 02/10/2023

US02005NBL38
SELL

GM 3 11/20 08/07/2022

US37045XCU81

Related reports:

The spread difference between Ally Financial 1.95% 2023 (ALLY 23's, BBB-) and General Motors Financial Company 3.65% 2022 (GM 22's, BBB-) has been inverted. ALLY 23's have historically traded under GM 22's, but currently trade 23bps wider (2 standard deviations). Holders of GM 22's have the opportunity to take profits at 34bps and switch into ALLY 23's at 57bps.

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Wells Fargo Looking Expensive vs Bank of America

Wells Fargo Looking Expensive vs Bank of America

January 26, 2021
BUY

BAC 2 74/125 29/04/2031

US06051GJB68
SELL

WFC 5 3/8 07/02/2035

US949746JM44

Related reports:

Sharp tightening in WFC 35's makes them look expensive vs peers. We highlight the dislocation in spread difference between BAC 31's and WFC 35's, which has increased from -24bps to +5bps. Holders of WFC 35's have the opportunity to take profits at 89bps and switch into BAC 31's at 94bps.

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AEP Cheap vs ONE Gas

AEP Cheap vs ONE Gas

January 25, 2021
BUY

AEP 3 13/20 01/04/2050

US00115AAM18
SELL

OGS 4 329/500 01/02/2044

US68235PAF53

Related reports:

The sharp tightening in ONE Gas 4.658% 2044 (OGS 44's, A) makes them look expensive against other utilities. Katana identifies a significant dislocation against AEP Transmission Company 3.65% 2050 (AEP 50's, A). AEP 50's have historically traded through OGS 44's by between 20 and 60bps. Due to the sudden move in OGS 44's, they now trade at the same spread. Holders of OGS 44's have the opportunity to take profits at 125bps and switch into AEP 50's at 126bps, with a potential reversion of 34bps were the spread difference to return to the historical mean.

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BROADCOM Looking Cheap vs Hewlett Packard

BROADCOM Looking Cheap vs Hewlett Packard

January 22, 2021
BUY

AVGO 4 1/4 15/04/2026

US11135FAZ45
SELL

HPE 4 9/10 15/10/2025

US42824CAW91

Related reports:

The spread difference between BROADCOM 4.25% 2026 (AVGO 26's, BBB-) and Hewlett Packard 4.9% 2025 (HPE 25's, BBB) is at its highest as HPE 25's have been tightening faster than AVGO 26's since early December. The exponentially weighted mean of the difference has increased from 10bps to 24bps and currently AVGO 26's are trading 29bps wider. Holders of HPE 25's have the opportunity to take profits at 68bps and switch into AVGO 26's at 97bps.

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