European Bond Research - June 12, 2019

Posted by Corey Mahoney on Jun 12, 2019 12:03:42 PM
GERMAN INVESTMENT LEADER DEUTSCHE BANK alerted 1,000 clients they are at risk of severing relationships in a compliance effort. The bank is referring to the initiative as “Know your customer” in a statement said, “This is a standardized notification that has been sent to thousands of clients globally”. Deutsche bank is demanding company-ownership information and other sensitive documentation by the end of June. FTSE 100 -0.39%, German DAX -0.25%, CAC 40 -0.51%, STOXX Europe 600 -0.22%.  The 10-year Gilt rose 0.4 basis points.

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THE FINANCIAL SECTOR OF BRITAIN IS NOT PREPARED for a no-deal Brexit as “residual” preparations are still pending completion, specifically in the insurance sector.  An EU executive stated, “if the United Kingdom leaves the European Union without an agreement on 31 October 2019, this will necessarily result in some market fragmentation in financial services”.  The UK’s Financial Conduct Authority is concerned banks are leaving too few senior officials in Britain to monitor operations and reduce risk.  The EU Commission is also worried banks will not be able to fully implement contingency plans given staff relocations. 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, WPP Finance Corp. (USD) 3.75% 9/19/2024 made some analysts' 'Conviction Buy' lists. (See the chart for WPP Finance Corp. 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): France 28 bp and Sweden 12 bp.

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New Issuance

New Issues New Issues [Continued]

1. Luminor Bank AS of Estonia (EUR) 1.375% 10/21/2022 (06/11/2019): 300MM Senior Unsecured Notes, Price at Issuance 99.853, Yielding 1.421%.

2. Karlou BV (USD) 7.75% 6/18/2024 (06/11/2019): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.75%.


ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 06/12/2019, 132.68 NAV as of 06/12/2019, 103.59
Daily NAV Change (%) +0.01%  Daily NAV Change (%) -0.22%

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 ratecurrently 7.7% (seasonally adjusted, March 2019)
  • Eurostat's quarterly GDP: 0.4% (2019 Q1)
  • 6-month Euribor: current value -0.258%, as of 06/11/2019

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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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