European Bond Research - May 17, 2019

Posted by Corey Mahoney on May 17, 2019 12:45:18 PM
EUROPEAN INVESTMENT GRADE BONDS EDGED OUT its high yielding counterparts in net prices linked to actual trades. Equities settled lower as trade fears were reignited and Brexit uncertainty loom. FTSE 100 -0.07%, German DAX -0.44%, CAC 40 -0.11%, STOXX Europe 600 -0.33%. The 10-year Gilt lost 3.5 basis points.

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POUND STERLING PLUMMETS for the ninth consecutive day following the collapse of Brexit talks between the two majority parties.  Jeremy Corbyn, Labour leader stated talks have “gone as far as they can” in addition, “We have been unable to bridge important policy gaps between us”.  European auto sales slumped for the eighth consecutive month falling by 0.4 percent in April year-over-year.  The Bank of England is ramping up preparations for a no-deal Brexit, analyzing everything from traffic jams to shopping patterns.  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, Deutsche Bank AG (USD) 3.375% 5/12/2021 made some analysts' 'Conviction Buy' lists. (See the chart for Deutsche Bank AG bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.651 1.704 -75.9  
Belgium  10 0.397 0.405 -201.3  
France  10 0.295 0.308 -211.5  
Germany  10 -0.091 -0.094 -250.0  
Italy  10 2.687 2.747   27.7
Japan  10 -0.060 -0.051 -246.9  
Netherlands  10 0.102 0.102 -230.8  
Portugal  10 1.079 1.124 -133.1  
Spain  10 0.904 0.956 -150.5  
Sweden  10 0.035 0.034 -237.5  
U.K.  10 1.075 1.070 -133.5  
U.S.  10 2.410 2.377 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Ireland 32 bp and France 29 bp. Sovereign wideners (5Y): Germany 11 bp and UK 29 bp.

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New Issuance

New Issues New Issues [Continued]

1. KKR Group Finance Co. V (EUR) 1.625% 5/22/2029 Reg S (05/16/2019): 650MM Senior Unsecured Notes, Price at Issuance 99.543, Yielding 1.67%.

2. Rentokil Initial PLC (EUR) 0.875% 5/30/2026 (05/16/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.723, Yielding .916%.


ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 05/17/2019, 131.93 NAV as of 05/17/2019, 103.52
Daily NAV Change (%) +0.02% Daily NAV Change (%) +0.14%

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 -0.237%, as of 05/16/2019

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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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