Power Alley: The Issuances Yesterday May Be Fairly Read As Mr. Davis Thinking That Interest Rates Will Still Increase From Here, Generally...

This is never an exact science, to be sure (reading tea leaves, it is in truth) -- but Mr. Davis is both a former corporate treasurer, and former CFO at a series of large public life science companies. He's also a corporate lawyer, and tax maven.

So it is fair to assume that refinancing about $6 billion of the company's debt -- switching from shorter term, to longer term ("terming out"). . . is a suggestion that he suspects rates haven't topped off quite yet. [He also is laying in, early, some of the funding he'll use for the $11 billion Prometheus deal, announced last month.]

After all, Merck is one of the "bluest" of blue chip, A-rated public corporate debt issuers in the US. Their paper is almost as good as that of the US Treasury. So Merck gets nearly the tightest spreads over Treasuries when it prices issuances, of all corporates -- pharma cash flows to service debt are huge, and very stable -- like clockwork, almost.

So, in the longer term view, he must feel that this is the time to place/sell some debt -- as even though rates have been nearly constantly rising since 2021 -- he must think that action is not yet over, in the medium term.

Moreover, one might also read it as Mr. Davis expects the Democratic Party will hold the White House on and after 2024, since (very broadly speaking) interest rates tend to rise (and persist at higher levels) during Democratic administrations. Tighter money overall.

He may be expecting eight more years, minimum. But that last bit is just. . . spit-balling, now. We shall see. . . . Onward, grinning.

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