European Bond Research - April 3, 2019

UK HEADED FOR A DOWNTURN AS BREXIT WORRIES NEGATIVELY IMPACT SERVICES SECTOR. The PMI, a  barometer of the economy’s health tumbled to 48.9 in March from 51.3 in February, inducing the sterling to dip to $1.3156. “A stalling of the economy in the first quarter will create further stress on the second quarter unless demand revives suddenly, which seems highly improbable with Brexit looming,” mentioned IHS Markit. “In a no-deal scenario, both the EU and the UK would face a challenge of protecting their single markets,” mentioned European Commissioner, Pierre Moscovici. The UK 10-year Gilt increased seven basis points. FTSE 100, +0.23%, STOXX Europe 600 +0.91%, CAC 40 +0.76%, German DAX +1.68%.

EU COMMISSION IS READY TO RELEASE POST-BAILOUT GRANTS TO GREECE AFTER BANK REFORM. Athens would receive nearly 1 billion euros endorsed by Eurozone finance ministers, permitting the country to borrow capital at reasonable rates. The money partly comes from profits made by Eurozone central banks on their holdings of Greek bonds that will gradually mature over the coming years. Among European investment grade-yield bonds showing a concurrence of top price gains at appreciable volumes traded, Barclays PLC (USD) 5.2% 5/12/2026 made some analysts' 'Conviction Buy' lists. (See the chart for  Barclays PLC bonds below). Niral Mehta (nmehta@advantagedata.com).

Country	Maturity (Y)	Yield (%)	Previous (%)	Spread (bp)
Australia	10	1.820	1.813	-65.8
Belgium	10	0.446	0.460	-203.3
France	10	0.356	0.378	-212.3
Germany	10	-0.047	-0.025	-252.5
Italy	10	2.538	2.513		5.9
Japan	10	-0.067	-0.078	-254.6
Netherlands	10	0.053	0.075	-242.6
Portugal	10	1.252	1.275	-122.7
Spain	10	1.109	1.143	-136.9
Sweden	10	0.201	0.197	-227.8
U.K.	10	1.006	1.048	-147.3
U.S.	10	2.479	2.501	...

LATEST NEWS: Top moves, sovereign tighteners (5Y): Belgium bp and China 42 bp. Sovereign wideners (5Y): Austria 12 bp and Germany 11 bp.

New Issues	New Issues [Continued]
1. Verizon Communications Inc. (GBP) 2.5% 4/8/2031 (04/02/2019):500MM Senior Unsecured Notes, Price at Issuance 99.591, Yielding 2.524%. 2. NIBC Bank (EUR) 2% 4/9/2024 (04/02/2019): 300MM Senior Non Preferred Notes, Price at Issuance 99.939, Yielding 2.013%. 3. Volkswagen Financial Services NV (NOK) 2.56% 4/11/2022 (04/02/2019): 500MM Senior Unsecured Notes, Price at Issuance 100.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 04/03/2019, 131.21	NAV as of 04/03/2019, 104.04
Daily NAV Change (%) -0.13%	Daily NAV Change (%) +0.29%

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 -0.230%, as of 04/02/2019

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