European Bond Research - June 11, 2019

Posted by Corey Mahoney on Jun 11, 2019 12:00:48 PM
EUROZONE INVESTOR CONFIDENCE DETERIORATED IN JUNE following suit with business confidence as escalating global trade tensions take a toll on the market. On Tuesday, investors looked beyond the report, Hugo Boss a German-based luxury brand jumped 4.3 percent and the automotive industry saw marginal gains after easing tariff concerns. FTSE 100 +0.40%, German DAX +1.25%, CAC 40+0.75%, STOXX Europe 600 +0.85%. The 10-year Gilt gained 1.1 basis points.

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WAGES IN THE UK GREW AT A FASTER RATE THAN ANTICIPATED in April despite hiring slowing as the unemployment rate remains at a 44-year low.  Earnings including bonuses, increased by 3.1 percentbetween the months of February and April.  Britain’s labor market has remained resilient since the nation voted to leave the EU in June 2016.  The construction industry reports having a third less work than one year prior as “the collapse of two large high-profile contractors” hinders subcontractor pipelines.  “Brexit, the dominance of large contractors and late payment problems are all acting as brakes on the sector.”  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, Telecom Italia Capital SA (USD) 7.2% 7/18/2036 made some analysts' 'Conviction Buy' lists. (See the chart for Telecom Italia Capital SA bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.482 1.482 -65.6  
Belgium  10 0.204 0.155 -193.3  
France  10 0.136 0.082 -200.1  
Germany  10 -0.216 -0.254 -235.4  
Italy  10 2.359 2.350   22.2
Japan  10 -0.121 -0.115 -225.8  
Netherlands  10 -0.040 -0.092 -217.7  
Portugal  10 0.681 0.618 -145.7  
Spain  10 0.605 0.551 -153.2  
Sweden  10 -0.054 -0.081 -219.1  
U.K.  10 0.843 0.817 -129.4  
U.S.  10 2.137 2.085 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Spain 45 bp and Korea 32 bp. Sovereign wideners (5Y): Ireland 30 bp and UK 31 bp.

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New Issuance

New Issues New Issues [Continued]

1. JP Morgan Chase Bank NA (USD) 0% 6/20/2049 (06/10/2019):70MM Senior Unsecured Notes, Price at Issuance 100, Yielding 0%.

2. NatWest Markets PLC (EUR) FLT% 6/18/2021 (06/11/2019):1250MM Senior Unsecured Notes.


ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 06/11/2019, 132.73 NAV as of 06/11/2019, 103.84
Daily NAV Change (%) +0.11%  Daily NAV Change (%) +0.14%

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 -0.258%, as of 06/10/2019

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Topics: Analytics, bonds, junk bonds, bond market, corporate bonds, market analytics, New Issues, News, research, EU, market update, European

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