European Bond Research - May 10, 2019

Posted by Corey Mahoney on May 10, 2019 12:59:45 PM
BRITAIN’S ECONOMY EXPANDED IN THE FIRST THREE MONTHS OF 2019 as businesses prepared for Brexit delivering orders before the deadline. GPD grew at an annual rate of 2 percent compared to the previous quarter of 0.9 percent. German exports bounced back at rapid pace soaring 1.5 percent month-over-month in March, exceeding analyst expectations. The 10-year Gilt rose 0.6 basis points. Equities settled higher on the positive economic placing trade concerns on the backburner, FTSE 100 +0.14%, German DAX +0.86%, CAC 40  +0.41%, STOXX Europe 600 +0.43%.

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SEVERAL BANKS ARE CONFRONTED WITH EU ANTITRUST FINES for a multi-trillion dollar foreign exchange scheme, among the banks are Barclays, Citigroup, HSBC and JPMorgan.  Interestingly, ‘U.S. regulators said the foreign exchange rate rigging was allegedly done through chat rooms with such names as “The Cartel,” “The Mafia” and “The Bandits’ Club,” through tactics with such names as “front running,” “banging the close,” “painting the screen” and “taking out the filth.”’  The Italian government may step in with state funds to recapitalize and salvage the quarreling Carige bank.  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,  HSBC Holdings PLC (USD) 5.25% 3/14/2044 made some analysts' 'Conviction Buy' lists. (See the chart for HSBC Holdings PLC bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.725 1.746 -73.3  
Belgium  10 0.438 0.420 -202.0  
France  10 0.347 0.327 -211.1  
Germany  10 -0.047 -0.042 -250.5  
Italy  10 2.676 2.613   21.8
Japan  10 -0.046 -0.051 -250.4  
Netherlands  10 0.142 0.136 -231.6  
Portugal  10 1.113 1.083 -134.5  
Spain  10 0.983 0.957 -147.5  
Sweden  10 0.067 0.113 -239.1  
U.K.  10 1.126 1.138 -133.2  
U.S.  10 2.458 2.484 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): France 28 bp and Korea 35 bp. Sovereign wideners (5Y): UK 29 bp and Sweden 11 bp.

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New Issuance

New Issues New Issues [Continued]

1. Erste Group Bank AG (EUR) FLT% 5/9/2024 (05/09/2019): 50MM Secured Notes, Price at Issuance 101.35.

2. Eaton Corp. (EUR) 0.697% 5/14/2025 (05/09/2019): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding .697%.


ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 05/10/2019, 131.62 NAV as of 05/10/2019, 103.9
Daily NAV Change (%) 0.00% Daily NAV Change (%) -0.18%

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 -0.231%, as of 05/09/2019

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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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