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).
Sovereign-Debt Snapshot
| 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 | ... | |
Credit-Default Swap Market
New Issuance
| 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. |
ADI Indexes
| 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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