European Bond Research as of December 6th, 2017

Posted by Marlena Mathews on Dec 6, 2017 2:02:14 PM
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JUNK BONDS CAME UNDER MORE PRESSURE, outpaced by investment-grade debt in net prices, for a second day. Profit-taking, political infighting (in both Europe and the U.S.), and the occurrence of massive pullbacks in shares of Hammerson PLC and Saga PLC, all factored into the mostly risk-averse European session. More bumps along the road in Brexit (British exit from EU) were also in the mix, as London traders faced the backdrop of an earlier sell-off in Asian markets, while the oil-and-energy sector was roiled by a pullback in global crude-oil prices.            


Investors shunned risk for the most part, keeping the Stoxx 600 and several single-nation equities indexes in the red. European junk bonds retracted along with stocks, in net price moves linked to actual trades. Profit-taking after the recent run in gains of global equities was a dominant trend today, with investors adopting a tentative, 'wait-and-see' mode. Earlier defensive moves in Asia set the stage for an analogous risk-off bias in Europe. Mirabaud Asia's Andrew Clarke referred to investors as "locking in profits earlier than usual for the year and not opening any new positions ... ". Meanwhile increasing challenges in getting a Brexit deal done in Europe and political wrangling in the U.S. over tax reform and a possible shutdown of the government Saturday, kept some investors focused upon political risk. Sector cues for European bond traders were given by a 1.3% gain in EasyJet PLC shares, while the tech group was impacted by a 1.9% pullback in Micro Focus International PLC. ADI (Advantage Data Inc.) extensive corporate-bond index data showed a net daily yield increment for high-yield versus investment-gradeconstituents. High-grade bonds outpaced high-yield debt as of 4 PM London time. Among European high-grade bonds showing a concurrence of top price gains at appreciable volumes traded, Barclays PLC 4.375% 1/12/2026 made some analysts' 'Conviction Buy' lists. (See chart for Virgin Media bonds, above.) 

Topics: junk bonds, bond market

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