European Bond Research as of September 6th, 2017

Posted by Sean Riddell on Sep 6, 2017 12:55:15 PM
RISK-OFF SENTIMENT NOTCHED LOWER among investors in European corporate debt. Relative to yesterday's levels of risk aversion, trades in corporate bonds reflected a very slight favor for junk bonds in price gains linked to actual trades. Nonetheless geopolitical overhang amid N. Korean nuclear warhead posturing kept a lid on gains in risk assets. So too did pressure on the European insurance sector ahead of projected damage by intense hurricane Irma, headed for Puerto Rico and Florida. The Stoxx 600 index vacillated in the shallow red  amid data showing a dip in Germany's manufactured-goods orders, although shares of Deutsche Bank AG and Micro Focus International PLC posted notable gains.


Investors shunned risk less fervently than seen yesterday in their bond trades, even as risk-off sentiment remained very much in the picture. Risk tolerance was evidenced by a very  slight favor for European junk debt over investment-grade bonds, in net prices linked to trades. Continued acute attention to N. Korean war posturing remained very much in evidence among investors, as major risk positions continued to be taken off the table. On the heels of the N. Korean  regime's thermonuclear bomb testing over the weekend, along with uncertainties linked to super-hurricane Irma, caution kept most risk-on plays at bay. Regarding Irma, Puerto Rica's governor Ricardo Rossello noted, "The dangerousness of this event is like nothing we've ever seen ...", while Univ. of Miami's Brian McNoldy remarked, "You'd be hard pressed to find any model that doesn't have some impact on Florida." ADI (Advantage Data Inc.) extensive corporate-bond index data showed a net daily yield increment for investment-grade versus high-yield constituents. High-yield bonds edged out investment-grade debt in net prices linked to trades, as of 4 PM London time. Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded, Fiat Chrysler NV 5.25% 4/15/2023 made some analysts' 'Conviction Buy' lists. (See chart for Telecom Italia bonds, above.)  




Topics: bonds, CDS, New Issues

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