European Bond Research - July 31, 2019

EURO ZONE GDP GREW BY A DISMAL 0.2 PERCENT during the second quarter of 2019 down from 0.4 percent during the first three months of 2019.  Slowing GDP across the euro zone strengthens a case for the European Central Bank to initiate additional monetary easing. “We expect the ECB to respond to this broad-based economic weakness – which we think is likely to continue – with a round of extra policy easing, including restarting QE and cutting rates.” FTSE 100 -0.81%, German DAX +0.39%, CAC 40+0.27%, STOXX Europe 600 +0.18%.  The 10-year Gilt lost 1.1 basis points. 

ASTON MARTIN LUXURY AUTOMAKER BASED IN THE UK nose-dived 17 percent after reporting a 78.8 million pound loss during the first six months of 2019. Aston Martin bonds also traded notably lowersome shedding more than 5 points over the past week. “We are disappointed that our projections for wholesales have fallen short or our original targets, impacted by weakness in two of our key markets as well as continued macro-economic uncertainty.” Aston Martin Capital Ltd. (USD) 6.5% 4/15/2022 Reg S 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,   LyondellBasell Industries (USD) 4.625% 2/26/2055  made some analysts' 'Conviction Buy' lists. (See the chart for  Aston Martin bonds  below). Corey Mahoney (cmahoney@advantagedata.com).

 

LATEST NEWS: Top moves, sovereign tighteners (5Y): Italy 165 bp and Korea 28 bp. Sovereign wideners (5Y): UK 33 bp and Ireland 30 bp.

New Issues	New Issues [Continued]
1. Contourglobal Power Hldg SA (EUR) 4.125% 8/1/2025 (07/31/2019): 100MM First Lien Notes. 2. BNP Paribas (EUR) 0% 8/12/2022 (07/31/2019): 205MM Senior Unsecured Notes, Price at Issuance 100.423, Yielding -.14%.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 07/31/2019, 134.93	NAV as of 07/31/2019, 105.25
Daily NAV Change (%) +0.01%	Daily NAV Change (%) -0.03%

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 -0.355%, as of 07/30/2019

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