Advantage Data High Yield Bond Market Summary

European Bond Research - March 6, 2019

Posted by Niral Mehta on Mar 6, 2019 12:14:53 PM
THE UNITED KINGDOM ACHIEVED A BROAD agreement on import tariffs in the event the nation leaves the European Union without a finalized deal.  Britain is “planning to slash tariffs on 80-90 percent of goods if left with no deal” benefiting consumers but having a detrimental impact on the factories ability to remain competitive.  Without a definitive agreement on March 29th, all exports from Britain will face EU tariffs.  The UK 10 year Gilt dipped 5.6 basis points. FTSE 100 +0.06%, STOXX Europe 600 -0.06%, CAC 40 -0.16%, German DAX -0.31%

CHINESE FOREIGN DIRECT INVESTMENT IN EUROPE PLUMMETED 40 PERCENT in 2018 marking the lowest level in four years.  The decline is attributed to tightening capital controls in China attempting to prevent the outflow of money into other countries.  Recent changes in European Union regulations are likely to further hinder Chinese investment as the bloc introduces screening of foreign direct investment. The automotive industry took an acute hit on Wednesday after Schaeffler, a German auto parts manufacturer cautioned investors of an “extremely challenging” business environment in 2019 as the company plans to restructure.  Shares of major automakers including Daimler, Volkswagen, and BMW nosedived on the announcement.  ADI (Advantage Data Inc.) corporate-bond index data showed a net daily yield increment for high-grade versus high-yield constituents. High-grade bonds edged out high-yield debt as of 3 PM, London time. Among European high-grade bonds showing a concurrence of top price gains at appreciable volumes traded,  Actavis Funding SCS (USD) 3.45% 3/15/2022 made some analysts' 'Conviction Buy' lists. (See the chart for Actavis Funding bonds below.) Corey Mahoney  (cmahoney@advantagedata.com).

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 2.167 2.203 -55.4  
Belgium  10 0.689 0.684 -203.1  
France  10 0.561 0.558 -216.0  
Germany  10 0.170 0.163 -255.0  
Italy  10 2.707 2.732 -1.4  
Japan  10 0.008 0.001 -271.3  
Netherlands  10 0.269 0.261 -245.2  
Portugal  10 1.457 1.464 -126.3  
Spain  10 1.155 1.174 -156.5  
Sweden  10 0.399 0.403 -232.2  
U.K.  10 1.289 1.277 -143.2  
U.S.  10 2.721 2.722 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Korea 28 bp and Ireland 36 bp. Sovereign wideners (5Y): Finland 13 bp and Germany 11 bp.

New Issuance

New Issues New Issues [Continued]

1. Heathrow Funding LTD (EUR) 1.875% 3/14/2034 (03/05/2019):650MM Secured Notes.

2. HSBC Holdings PLC (USD) 3.803% 3/11/2025 (03/05/2019):2500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.8%.

 

ADI Indexes

DATA CHECK:
iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 03/06/2019, 129.6 NAV as of 03/06/2019, 104.19
Daily NAV Change (%) -0.1% Daily NAV Change (%) -0.19%

OVERALL EUROPEAN CREDIT MARKET:
The euro-zone economy shows signs of positive momentum, although conditions are expected to deteriorate hindered by the termination of quantitative easing, weakening credit rating quality, and uncertainty regarding the outcome of Brexit. Closely watched indicators and rates:
  • Eurostat's unemployment rate: currently 7.8% (seasonally adjusted, January 2019)
  • Eurostat's quarterly GDP: 0.2% (2018 Q3 Final)
  • 6-month Euribor: current value -0.231%, as of 03/05/2019

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Topics: Analytics, market analytics, research, EU, market update, European


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