Duke Energy and the DUK 4 ½ 08/15/32

Today we were asked to analyze Duke Energy and share our thoughts.

We cover the curve, the hold co and the balance sheet.

We felt it was instructive to the trader and of course… to marketing our model! Yes, this is a free lunch, but we hope one day you buy dinner!

Duke Energy Balance Sheet and Term Structure

Model trades the holdco from the short side owing to the adding net debt QoQ YoY

However:

• The 'DUK 4 1/2 08/15/32 is one of less than 70 Utility holdco bonds with $1 bill of market cap

• It's considered a short trading indicator owing to the fact that it trades at its 52-week tight spread

• But it is also a "rolldown" bond. Which means - it's going to trade off of the 5Y next So @ 78/10Y - it's actually trading @ 131/5Y

• Relativity: The bond is trading +28 to the Duke 2.45 6/1/30 - which means on a 10Y basis it's a short. On a 5-year basis it's the cheapest bond in the DUK structure. Hence why dealers should start using the UST 7Y for secondary bonds.

The DUK curve with the 32s highlighted below

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