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 (cmahoney@advantagedata.com).
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
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
| 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% |
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)
- 6-month Euribor: current value -0.259%, as of 06/06/2019
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