European Bond Research as of January 10, 2017

Posted by Molly Housel on Jan 10, 2017 12:00:12 PM
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European high yield debt held a slight edge over investment grade names, even as the pan-European Stoxx 600 equities index stayed mired in the shallow red.

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'Risk-on' trades were hampered somewhat, in part hamstrung by news on Italian banks. Nonetheless European junk bonds edged out investment-grade names in net price gains linked to actual trades. Reports that Italy's Popolare di Vicenza and Veneto Banca proposed a settlement with shareholders that may incur costs of about 600 million euros, reignited attention to capital infirmities among the country's lenders. The news drew down a range of other euro-bloc banks, sending UniCredit SpA, Intesa Sanpaolo SpA, and Unione di Banche Italiane SpA shares all lower, while those of capital-stricken Banca Monte dei Paschi di Siena SpA remained suspended pending an Italian-government bailout. The reports also sent Deutsche Bank AG and Banco Popolar Espanol SA over 2% into the red, as of 4 PM, London time. While these moves weighed on the Stoxx 600, U.K. retailers buoyed the index to a degree, with Tesco PLC stock up 5.4%, Wm. Morrison Supermarkets PLC up 3.6%, lending cues to corporate-bond traders. ADI (Advantage Data Inc.) extensive corporate-bond index data showed a net daily yield increment for high-yield versus investment-grade constituents. High-yield bonds edged out high-grade debt in net price gains linked to actual trades. Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded, Fiat Chrysler Automobiles NV 5.25% 4/15/2023 made some analysts' 'Conviction Buy' lists.

M. F. Brown 

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Topics: High Yield, Investment Grade, debt

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