European Bond Research - June 7, 2019

Posted by Corey Mahoney on Jun 7, 2019 12:35:00 PM
INFLATION IS EXPECTED TO RISE MARKING A DECADE HIGH in Britain sounding alarms regarding the long term sustainability of the economy.  Long-run inflation forecasts rose to 3.8 percent swayed by an increase in energy prices.  European equities rally on Friday as investors are optimistic on a trade deal between the US and Mexico despite a weak US jobs report, FTSE 100 +1.06%, German DAX +1.01%, CAC 40 +1.90%, STOXX Europe 600 +1.03%.  The 10-year Gilt lost 0.1 basis points. 

unnamed - 2019-05-29T134004.067

INDUSTRIAL OUTPUT IN GERMANY SLIPPED 1.9 PERCENT in April largely due to a significant decline in exports.  The country narrowly avoided a recession in the fourth quarter of 2018 and recent data shows signs of a turbulent year to come.  “The German industrial sector is clearly still having trouble to recover fully from last year's woes”.  Global trade tensions remain at the forefront of economic issues hindering the German economy.  Meanwhile, Spain’s economy is expected to expand by 2.4 percent this year surpassing the previous estimate of 2.2 percent.  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, Actavis Funding SCS (USD) 4.75% 3/15/2045 made some analysts' 'Conviction Buy' lists. (See the chart for Actavis Funding SCS bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.479 1.492 -64.5  
Belgium  10 0.191 0.222 -193.3  
France  10 0.122 0.160 -200.2  
Germany  10 -0.237 -0.224 -236.0  
Italy  10 2.486 2.489   36.3
Japan  10 -0.121 -0.126 -224.5  
Netherlands  10 -0.057 -0.034 -218.0  
Portugal  10 0.669 0.679 -145.4  
Spain  10 0.612 0.639 -151.2  
Sweden  10 -0.049 -0.049 -217.3  
U.K.  10 0.827 0.866 -129.7  
U.S.  10 2.124 2.134 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Germany 12 bp and Spain 51 bp. Sovereign wideners (5Y): Denmark 12 bp and UK 30 bp.

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New Issuance

New Issues New Issues [Continued]

1. Banque Fed du Credit Mutuel (GBP) 1.75% 12/19/2024 (06/06/2019): 500MM Senior Preferred Security, Price at Issuance 99.922, Yielding 1.758%.

2. Eutelsat (EUR) 2.25% 7/13/2027 (06/06/2019): 600MM Senior Unsecured Notes, Price at Issuance 99.822, Yielding 2.274%.


ADI Indexes

unnamed - 2019-05-28T172049.509
iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 06/07/2019, 132.63 NAV as of 06/07/2019, 103.63
Daily NAV Change (%) +0.25%  Daily NAV Change (%) +0.43%

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 -0.259%, as of 06/06/2019

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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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