BRITAIN’S ECONOMY CONTRACTED FOR THE SECOND STRAIGHT MONTH on a significant decline in car production. GDP dipped 0.4 percent in the month of April as automotive production slipped 2.7 percent month-over-month. Rob Kent-Smith, head of GDP at the government statistic agency blames softening orders on Brexit stockpiling, “There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK’s original EU departure date has faded”. The slowdown is a result of businesses stockpiling goods in the first quarter, the economy should pick up in the third quarter as companies return to normal buying schedules. Surprisingly, the labor market has strengthened in a result of strong wage growth maintaining an unemployment rate near 50-year lows. 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 bonds below). Corey Mahoney (cmahoney@advantagedata.com).
Sovereign-Debt Snapshot
| Country | Maturity (Y) | Yield (%) | Previous (%) | Spread (bp) | |
|---|---|---|---|---|---|
| Australia | 10 | 1.482 | 1.479 | -60.1 | |
| Belgium | 10 | 0.155 | 0.191 | -192.7 | |
| France | 10 | 0.082 | 0.122 | -200.0 | |
| Germany | 10 | -0.254 | -0.237 | -233.6 | |
| Italy | 10 | 2.350 | 2.486 | 26.8 | |
| Japan | 10 | -0.115 | -0.121 | -219.7 | |
| Netherlands | 10 | -0.092 | -0.057 | -217.4 | |
| Portugal | 10 | 0.618 | 0.669 | -146.4 | |
| Spain | 10 | 0.551 | 0.612 | -153.1 | |
| Sweden | 10 | -0.081 | -0.049 | -216.3 | |
| U.K. | 10 | 0.817 | 0.827 | -126.5 | |
| U.S. | 10 | 2.082 | 2.120 | ... | |
Credit-Default Swap Market
New Issuance
| New Issues | New Issues [Continued] |
|---|---|
|
1. Cooperatieve Rabobank UA (NL) (USD) 1.88% 6/18/2024 (06/10/2019): 185MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.88%. 2. JP Morgan Chase Bank NA (USD) 0% 6/20/2049 (06/10/2019):70MM Senior Unsecured Notes, Price at Issuance 100, Yielding 0%. |
ADI Indexes
| iShares Core EUR UCITS | iShares Euro High Yield UCITS |
| NAV as of 06/10/2019, 132.6 | NAV as of 06/10/2019, 103.81 |
| Daily NAV Change (%) +0.05% | Daily NAV Change (%) +0.25% |
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 7.7% (seasonally adjusted, March 2019)
- Eurostat's quarterly GDP: 0.4% (2019 Q1)
- 6-month Euribor: current value -0.256%, as of 06/07/2019
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