European Bond Research - April 12, 2019

GERMAN GOVERNMENT EXPECTS THE ECONOMY TO GROW BY 0.5 PERCENT THIS YEAR, LOWER THAN A RECENT ESTIMATE OF 0.8. German Finance Minister mentioned, “The economy is losing momentum but still growing, with private consumption and state spending expecting to support overall growth this year.” Unresolved trade disputes, Brexit uncertainty and a sluggish world economy have hit foreign demand and hurt manufacturers. Stricter pollution standards are challenging the country’s car manufacturers, a critical component of their GDP. If the slowdown worsens, it will put pressure on the ECB to provide more stimulus for the Eurozone economy. The UK 10-year Gilt increased six-basis points.  FTSE 100  -0.14%, STOXX Europe 600 +0.11%, CAC 40 +0.33%, German DAX +0.54%.

HSBC HAS MOVED OVER JOBS TO PARIS TO DEAL WITH BREXIT. This act was initiated to diversify risk across the bank’s lending business, which has declined over the recent months impairing the revenue. Italy’s UBI Banca has showed interest over M&A opportunities to create value for shareholders, and to be able to offer their clients a variety of products and services. Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded,  Petrobras Global Finance BV (USD) 5.75% 2/1/2029 made some analysts' 'Conviction Buy' lists. (See the chart for  Petrobras Global Finance bonds below). Niral Mehta (nmehta@advantagedata.com).

Country	Maturity (Y)	Yield (%)	Previous (%)	Spread (bp)
Australia	10	1.869	1.885	-62.8
Belgium	10	0.434	0.419	-206.3
France	10	0.334	0.321	-216.3
Germany	10	-0.007	-0.023	-250.4
Italy	10	2.372	2.410	-12.5
Japan	10	-0.059	-0.056	-255.6
Netherlands	10	0.073	0.058	-242.4
Portugal	10	1.130	1.170	-136.7
Spain	10	1.009	1.039	-148.9
Sweden	10	0.228	0.221	-226.9
U.K.	10	1.150	1.097	-134.7
U.S.	10	2.497	2.469	...

LATEST NEWS: Top moves, sovereign tighteners (5Y): Belgium 24 bp and China 42 bp. Sovereign wideners (5Y): France 27 bp and Korea 33 bp.

New Issues	New Issues [Continued]
1. Yorkshire Water Finance PLC (GBP) 2.75% 4/18/2041 (04/11/2019): 350MM Secured Notes, Price at Issuance 97.912, Yielding 2.859%. 2. Societe Generale (AUD) 4.5% 4/18/2034 (04/11/2019): 300MM Subordinated Notes, Price at Issuance 100, Yielding 4.5%.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 04/12/2019, 131.24	NAV as of 04/12/2019, 104.34
Daily NAV Change (%) -0.18%	Daily NAV Change (%) +0.13%

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, February 2019)
• Eurostat's quarterly GDP: 0.2% (2018 Q3 Final)
• 6-month Euribor: current value -0.232%, as of 04/11/2019

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