European Bond Research - May 15, 2019

Posted by Corey Mahoney on May 15, 2019 12:19:55 PM
UNICREDIT PROGRESSES FORWARD with its plans to place a bid for Germany’s Commerzbank in a deal worth an estimated 9.3 billion euros, Commerzbank shares spiked 4.7 percent. The German government will have to approve any merger given their 15 percent stake in the bank originating from a bailout in 2008. The 10-year Gilt lost 3.4 basis points. FTSE 100 +0.70%, German DAX +0.75%, CAC 40 +0.33%, STOXX Europe 600 +0.27%.

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THE GERMAN AUTO INDUSTRY FEARS A 12 PERCENT DECLINE if US tariffs are imposed on European cars, in addition, the DAX could face a 6 percent downturn.   “Germany is the tail on the U.S.-China trade war… If they blow up in a trade war, Germany is probably the place that gets hits worse,” CIO Mark Phelps of AllianceBernstein.  The economy of the blocs largest nation expanded by 0.4 percent during the first quarter of 2019 despite concerns from German engineering firms regarding an uncertainty with the US and China.  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, Electricite De France (USD) 4.875% 1/22/2044 Reg S made some analysts' 'Conviction Buy' lists. (See the chart for Electricite De France bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.711 1.731 -71.0  
Belgium  10 0.431 0.430 -199.0  
France  10 0.333 0.331 -208.8  
Germany  10 -0.067 -0.068 -248.8  
Italy  10 2.735 2.695   31.4
Japan  10 -0.051 -0.046 -247.2  
Netherlands  10 0.130 0.118 -229.1  
Portugal  10 1.136 1.152 -128.5  
Spain  10 0.971 0.989 -145.0  
Sweden  10 0.057 0.064 -236.4  
U.K.  10 1.107 1.102 -131.4  
U.S.  10 2.421 2.408 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Ireland 32 bp and France 28 bp. Sovereign wideners (5Y): China 49 bp

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New Issuance

New Issues New Issues [Continued]

1. Standard Chartered PLC (USD) 0% 6/4/2049 (05/14/2019): 100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 0%.

2. Fidelity National Info Services Inc (EUR) 0.125% 5/21/2021 (05/14/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.896, Yielding .177%.


ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 05/15/2019, 131.75 NAV as of 05/15/2019, 103.06
Daily NAV Change (%) +0.12% Daily NAV Change (%) -0.02%

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 -0.232%, as of 05/14/2019

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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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