European Bond Research - March 29, 2019

BRITAIN AGREED WITH THE EU TO DELAY BREXIT FROM THE ORIGINALLY PLANNED MARCH 29 UNTIL APRIL 12.  A further delay is imminent until May 22 “if the withdrawal agreement is approved this week,” House of Commons Leader, Andrea Leadson.  The volatility of the crisis had led investors fatigued over uncertainty, creating an unstable market.  Britain’s financial regulators have given European Union banks, insurers and asset managers ample time to prepare for a no-deal Brexit.  Trade in a host of countries will take a hit creating import and export barriers if there is no transition deal in place.  The UK 10-year Gilt decreased one basis point. FTSE 100, +0.50%, STOXX Europe 600 +0.48%, CAC 40 +0.83%, German DAX +0.75%.

LENDING TO BRITISH CONSUMERS GREW AT ITS SLOWEST PACE in four and a half years as banks approved fewer mortgages.  The annual growth rate in “unsecured consumer lending slowed to 6.3 percent from 6.5 percent in January.”  The BoE stated the number of mortgages approved for house purchase declined to 64,337 in February from 66,696 in January.  Net mortgage lending lagged at 3.4 billion pounds in February compared to 3.6 billion pounds in January.  Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded, Petrobras Global Finance BV (USD) 8.75% 5/23/2026 made some analysts' 'Conviction Buy' lists. (See the chart for Petrobras Global Finance BV bonds below). Niral Mehta (nmehta@advantagedata.com).

Country	Maturity (Y)	Yield (%)	Previous (%)	Spread (bp)
Australia	10	1.738	1.787	-64.9
Belgium	10	0.406	0.393	-198.2
France	10	0.316	0.298	-207.2
Germany	10	-0.067	-0.078	-245.5
Italy	10	2.479	2.438		9.1
Japan	10	-0.093	-0.066	-248.1
Netherlands	10	0.032	0.019	-235.6
Portugal	10	1.269	1.258	-111.8
Spain	10	1.088	1.048	-129.9
Sweden	10	0.154	0.154	-223.4
U.K.	10	1.000	1.015	-138.8
U.S.	10	2.388	2.374	...

LATEST NEWS: Top moves, sovereign tighteners (5Y): Belgium 25 bp and China 45 bp. Sovereign wideners (5Y):  Denmark 11 bp and Dubai 137 bp.

New Issues	New Issues [Continued]
1. Banca Popolare di Sondrio Scarl (EUR) 2.375% 4/3/2024 (03/28/2019): 500MM Senior Preferred Security, Price at Issuance 99.846, Yielding 2.408%. 2. Banque Fed du Credit Mutuel (EUR) 0.75% 6/8/2026 (03/28/2019):1500MM Senior Unsecured Notes, Price at Issuance 99.952, Yielding .757%. 3. Volkswagen Financial Services NV (NOK) FLT% 4/4/2022 (03/29/2019): 500MM Senior Unsecured Notes.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 03/29/2019, 131.14	NAV as of 03/29/2019, 103.27
Daily NAV Change (%) -0.01%	Daily NAV Change (%) +0.07%

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 7.8% (seasonally adjusted, January 2019)
• Eurostat's quarterly GDP: 0.2% (2018 Q3 Final)
• 6-month Euribor: current value -0.228%, as of 03/28/2019

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