European Bond Research - July 9, 2019

RETAIL SALES SLUMP IN BRITAIN rising at their slowest average pace on record in the twelve trailing months, reporting a dismal 0.6 percent growth.  Low unemployment has kept the economy afloat placing money into pockets of consumers however, they are reluctant to reach in and spend it.  “Overall, the picture is bleak: rising real wages have failed to translate into higher spending as ongoing Brexit uncertainty led consumers to put off non-essential purchases.”  FTSE 100 -0.20%, German DAX -0.88%, CAC 40 -0.30%, STOXX Europe 600 -0.54%.  The 10-year Gilt rose 0.2 basis points.  

GERMAN CHEMICAL GIANT BASF warned investors of a 30 percent profit cut citing a broad slowing market and the U.S. China trade war.  BASF bonds traded slightly lower on the weak outlook and the stock plummeted 5.8 percent.  The chemical company supplies thousands of manufactures globally across an array of industries ranging from auto manufacturing to consumer products and technology chip makers raising concerns about the global economy.  Automotive manufacturer BMW announced plans to further mitigate Brexit risk by transferring engine production out of the UK in order to comply with trade regulations. ADI (Advantage Data Inc.). Extensive corporate-bond index data showed a net daily yield increment for high-grade versus high-yield constituents. High-yield bonds edged out high-grade debt as of 3 PM, London time.  Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded,  Petrobras Global Finance BV (USD) 8.75% 5/23/2026 made some analysts' 'Conviction Buy' lists. (See the chart for Petrobras Global Finance BV below). Corey Mahoney (cmahoney@advantagedata.com).

LATEST NEWS: Top moves, sovereign tighteners (5Y): France 22 bp and Korea 32 bp. Sovereign wideners (5Y): Spain 38 bp and UK 30 bp.

New Issues	New Issues [Continued]
1. Prospect Capital Corp. (USD) 5% 7/15/2026 (07/08/2019): 0MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%. 2. Volvo Treasury AB (USD) 2.959% 7/12/2019 (07/08/2019): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.96%.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 07/09/2019, 134.36	NAV as of 07/09/2019, 105.32
Daily NAV Change (-0.14%)	Daily NAV Change (%) -0.12%

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, May2019)
• Eurostat's quarterly GDP: 0.4% (2019 Q1)
• 6-month Euribor: current value -0.348%, as of 07/08/2019

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