Amazon: High-frequency issuance constitutes a credit "hanging river", the retail sector is under pressure, and the rating is downgraded to cautious rating (Barclays)
Barclays downgraded Amazon and the retail sector to "cautious rating." The main reason is that as a high-frequency issuer, Amazon's future supply hangover and rising premium on new issuances will suppress its credit performance, and it is estimated that its ba
Barclays downgraded Amazon and the retail sector to "cautious rating." The main reason is that as a high-frequency issuer, Amazon's future supply hangover and rising premium on new issuances will suppress its credit performance, and it is estimated that its balance sheet still has room for further borrowing of US$25-35 billion. Amazon accounts for 35% and 25% of the U.S. and European investment-grade retail indices respectively, and its issuance has turned the sector's excess returns negative. It is highlights to sell many of Amazon's old US dollar and euro bonds and buy 5-year CDS to hedge against the risk of widening caused by continued issuance. One-sentence conclusion: Amazon's continued large-scale debt issuance has become the biggest suppressive factor for its own credit performance and the entire retail sector credit market, and supply pressure will be difficult to alleviate in the short term. Positive/negative: Negative for Amazon (AMZN.US) bonds and CDS, and negative for the entire investment-grade retail bond sector. The current market has partially reflected this, but Barclays believes that supply pressure will continue to suppress performance in the future. Catalyst: The size and pricing of Amazon's next bond issuance will test the market's acceptance of new issuance premiums. Whether there are cuts to Amazon's capital spending plans, reducing the need for debt issuance. Debt issuance plans from other large issuers in the retail sector.