European Bond Research - May 16, 2019

Posted by Corey Mahoney on May 16, 2019 12:26:02 PM
EUROZONE TRADE SURPLUS with the US contracted in March, meanwhile widened with China. The trade surplus on a seasonally adjusted basis decreased to 17.9 billion euros in March from 20.6 billion February. Equities settled higher upon easing fears regarding a trade war, FTSE 100 +0.50%, German DAX +1.51%, CAC 40 +1.08%, STOXX Europe 600 +1.06%. The 10-year Gilt dipped 0.5 basis points.

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FRENCH UNEMPLOYMENT DROPPED in the first quarter to the lowest level in a decade receding to 8.7 percent.  Sound improvement has pushed employment to its highest level since 1980; President Emmanuel Macron set a goal of 7 percent unemployment by 2020.  EU fined five banks 107 billion euros for manipulating foreign currency markets, among the banks Barclays, Citigroup and JP Morgan. “These cartel decisions send a clear message that the Commission will not tolerate collusive behavior in any sector of the financial markets”.  ADI (Advantage Data Inc.) extensive corporate-bond index data showed a net daily yield increment for high-grade versus high-yield constituents. High-yield bonds edged out high-grade debt as of 3 PM, London time.  Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded, Telecom Italia Capital SA (USD) 6.375% 11/15/2033
 made some analysts' 'Conviction Buy' lists. (See the chart for Telecom Italia Capital SA 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): Spain 58 bp and France 29 bp. Sovereign wideners (5Y): Denmark 11 bp and UK 29 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 05/16/2019, 131.91 NAV as of 05/16/2019, 103.38
Daily NAV Change (%) +0.12% Daily NAV Change (%) +0.31%

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 05/15/2019

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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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