European Bond Research - July 17, 2019

EUROPEAN STOCKS WERE SUBDUED ON WEDNESDAY following a report the ongoing trade dispute between the US and China has a “long way to go”. In London, house prices declined at the fastest pace in nearly a decade during May revealing the impact of Brexit within the real estate market; prices fell 4.4 percent annually. FTSE 100 -0.48%, German DAX -0.59%, CAC 40 -0.50%, STOXX Europe 600 -0.79%. The 10-year Gilt sank 6.2 basis points. 

INFLATION IN THE EUROZONE WAS REVISED HIGHER to 1.3 percent for the month of June still falling short of the ECB’s desirable range of 2 percent.  A-component Amazon of the FAANG group will be investigated by EU antitrust regulators examining if it misused merchant data breaching EU antitrust laws.  European Competition Commissioner Margrethe Vestager commented, “E-commerce has boosted retail competition and brought more choice and better prices.  We need to ensure that large online platforms don’t eliminate these benefits through anti-competitive behavior.”   ADI (Advantage Data Inc.). Extensive 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,  Electricite de France (USD) 3.625% 10/13/2025 Reg S made some analysts' 'Conviction Buy' lists. (See the chart for Electricite de France below). Corey Mahoney (cmahoney@advantagedata.com).

 

LATEST NEWS: Top moves, sovereign tighteners (5Y): Spain 38 bp and UK 29 bp. Sovereign wideners (5Y): Denmark 11 bp and Korea 32 bp.

New Issues	New Issues [Continued]
1. Westfield Stratford City Finance PLC (GBP) 1.642% 8/4/2026 (07/16/2019): 750MM Secured Notes. 2. LB Baden-Wuerttemberg (EUR) 0.375% 7/29/2026 (07/17/2019):500MM Senior Non Preferred Notes.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 07/17/2019, 133.95	NAV as of 07/17/2019, 105.10
Daily NAV Change (%) +0.10%	Daily NAV Change (%) -0.2%

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 7.5% (seasonally adjusted, May 2019)
• Eurostat's quarterly GDP: 0.4% (2019 Q1)
• 6-month Euribor: current value -0.35%, as of 07/16/2019

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