THE EUROPEAN CENTRAL BANK IS CONCERNED with the unexpected slow growth the Eurozone has experienced and in response plans to stimulate growth by implementing a loan program to banks. Banks will be given loans with generous terms knows as targeted longer-term refinancing operations or TLTRO’s. The pound sterling fell to its lowest levels against the euro since the 2008 financial crisis, “Investors should not be complacent about the threat of a no-deal exit”. The 10-year Gilt dipped 6.1 basis points. FTSE 100 -1.66%, German DAX -1.74%, CAC 40 -1.91%, STOXX Europe 600 -1.52%.

GERMAN BUSINESS MORAL DECLINED MORE than expected in May revealing confidence in Europe’s largest economy is fading.  The economy started the year off on a strong note, however, the service sector lagged behind taking a “substantial hit” in April, posting its largest monthly drop since 2013.  “Concerns about manufacturing persist. The service sector continues to keep the economy afloat but at a slightly slower pace.”  The 10-year German government bond yield sank further into negative territory following the economic report.  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, Huarong Finance II Co. LTD (USD) 4.875% 11/22/2026 made some analysts' 'Conviction Buy' lists. (See the chart for Huarong Finance II Co. LTD bonds below). Corey Mahoney (cmahoney@advantagedata.com).

Country	Maturity (Y)	Yield (%)	Previous (%)	Spread (bp)
Australia	10	1.646	1.644	-74.8
Belgium	10	0.402	0.423	-199.1
France	10	0.306	0.331	-208.8
Germany	10	-0.084	-0.059	-247.8
Italy	10	2.636	2.643		24.2
Japan	10	-0.050	-0.045	-244.4
Netherlands	10	0.113	0.136	-228.1
Portugal	10	1.028	1.031	-136.6
Spain	10	0.870	0.874	-152.4
Sweden	10	0.063	0.072	-233.0
U.K.	10	1.014	1.085	-137.9
U.S.	10	2.394	2.429	...

LATEST NEWS: Top moves, sovereign tighteners (5Y): Ireland 32 bp and UK 29 bp. Sovereign wideners (5Y): Korea 34 bp and Spain 54 bp.

New Issues	New Issues [Continued]
1. IHO Verwaltungs GmbH (EUR) 3.625% 5/15/2025 Reg S (05/22/2019): 800MM Secured Notes, Price at Issuance 100, Yielding 3.63%. 2. Total Capital SA (EUR) 1.535% 5/31/2039 (05/22/2019): 650MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.54%.

DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 05/23/2019, 131.39	NAV as of 05/23/2019, 103.00
Daily NAV Change (%) -0.13%	Daily NAV Change (%) -0.42%

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 7.7% (seasonally adjusted, March 2019)
• Eurostat's quarterly GDP: 0.4% (2019 Q1 Preliminary)
• 6-month Euribor: current value -0.242%, as of 05/22/2019

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