IN BRUSSELS THE EUROPEAN COMMISSION DECLARED Italy’s ballooning debt will violate the agreed budget potentially leading to the EU imposing sanction on the state. The EU made known Italy’s economy is deteriorating, "When we look at the Italian economy, we are seeing the damage recent policy choices are doing". In addition, on Wednesday the IMF advised Italy presents a “major risk” to the Euro. The 10-year Gilt sank 3.5 basis points. FTSE 100 +0.08%, German DAX +0.08%, CAC 40 +0.45%, STOXX Europe 600 +0.38%.

THE SERVICE SECTOR IN THE UK EXPANDED more than expected in May however, was unable to offset a sharp decline in manufacturing. “The UK economy remained close to stagnation midway through the second quarter as a result, registering one of the weakest performances since 2012.” Business optimism received a boost in May rising to the highest level in eight months despite Brexit anxieties holding back purchases. UK new automotive sales declined in May amid uncertainties over emission legislation introducing new low emission zones and policy changes in regards to eco-friendly car incentives. 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, Telecom Italia Capital SA (USD) 6.375% 11/15/2033 made some analysts' 'Conviction Buy' lists. (See the chart for Telecom Italia Capital SA bonds below). Corey Mahoney (cmahoney@advantagedata.com).

Country	Maturity (Y)	Yield (%)	Previous (%)	Spread (bp)
Australia	10	1.510	1.520	-60.9
Belgium	10	0.244	0.260	-187.4
France	10	0.184	0.204	-193.4
Germany	10	-0.206	-0.199	-232.5
Italy	10	2.527	2.578		40.9
Japan	10	-0.101	-0.092	-221.9
Netherlands	10	-0.021	-0.009	-214.0
Portugal	10	0.723	0.760	-139.6
Spain	10	0.663	0.697	-145.5
Sweden	10	-0.064	-0.057	-218.2
U.K.	10	0.902	0.864	-121.6
U.S.	10	2.118	2.072	...

LATEST NEWS: Top moves, sovereign tighteners (5Y): Korea 36 bp and UK 30 bp. Sovereign wideners (5Y): Ireland 31 bp and Spain 51 bp.

New Issues	New Issues [Continued]
1. Euronext NV (EUR) 1.125% 6/12/2029 (06/05/2019): 500MM Senior Unsecured Notes. 2. Unilever PLC (GBP) 1.5% 7/22/2026 (06/05/2019): 500MM Senior Unsecured Notes.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 06/05/2019, 132.15	NAV as of 06/05/2019, 103.08
Daily NAV Change (%) +0.31%	Daily NAV Change (%) +0.26%

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 Preliminary)
• 6-month Euribor: current value -0.254%, as of 06/04/2019

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