European Bond Research - June 14, 2019

Posted by Corey Mahoney on Jun 14, 2019 12:04:23 PM
BRITAIN CLAIMS THE GOVERNMENT IS IN “PRETTY GOOD SHAPE” in the event the country needs to leave the European Union without a deal. Officials believe a No Deal would provoke a 10 percent spike in food prices catapulting the economy into a recession. FTSE 100 -0.4%, German DAX -0.77%, CAC 40-0.4%, STOXX Europe 600 -0.53%. The 10-year Gilt rose 0.3 basis points.

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EUROPEAN EQUITIES WAVERED ON FRIDAY following the release of poor economic data from China.Industrial production grew 5 percent falling short of expectations of 5.5 percent, further signaling a global slowdown.  The EU intends to implement rules to make it easier to restructure euro zone sovereign debt.  Bonds issued after Jan 1, 2022, with maturities above one year would fall under the new measure.  Debt holders of sovereign bonds will see a tremendous reduction in their power to block a restructuring deal. 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, Lloyds Banking Group PLC (USD) 4.05% 8/16/2023 made some analysts' 'Conviction Buy' lists. (See the chart for Lloyds Banking Group bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.413 1.438 -67.6  
Belgium  10 0.181 0.183 -190.9  
France  10 0.112 0.122 -197.7  
Germany  10 -0.239 -0.237 -232.9  
Italy  10 2.368 2.434   27.9
Japan  10 -0.110 -0.111 -219.9  
Netherlands  10 -0.064 -0.055 -215.3  
Portugal  10 0.642 0.650 -144.8  
Spain  10 0.543 0.573 -154.7  
Sweden  10 -0.110 -0.093 -220.0  
U.K.  10 0.839 0.871 -125.1  
U.S.  10 2.090 2.118 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): France 27 bp and Germany 12 bp. Sovereign wideners (5Y): Spain 41 bp and Ireland 29 bp.

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New Issuance

New Issues New Issues [Continued]

1. Total Capital SA (CHF) 0.166% 12/21/2029 (06/13/2019): 200MM Senior Unsecured Notes, Price at Issuance 100, Yielding .166%.

2. Investor AB (EUR) 1.5% 6/20/2039 (06/13/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.863, Yielding 1.508%.


ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 06/14/2019, 132.73 NAV as of 06/14/2019, 103.44
Daily NAV Change (%) +0.14%  Daily NAV Change (%) +0.18%

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 -0.259%, as of 06/13/2019

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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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