European Bond Research - May 28, 2019

Posted by Corey Mahoney on May 28, 2019 12:22:05 PM
ECONOMIC SENTIMENT ROSE IN MAY surpassing expectations rebounding after 10 consecutive months of declines; the indicator improved to 105.1 in May from 103.9 in April.  In France, consumerconfidence hit a one-year-high reflecting households’ positive personal financial situations, meanwhile in Germany Europe’s largest economy, confidence dipped.  The 10-year Gilt slipped 2.8 basis points.  FTSE 100 +0.11%, German DAX -0.11%, CAC 40 -0.18%, STOXX Europe 600 -0.04%.

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EUROZONE CORPORATE LENDING IMPROVED IN APRIL rising 3.9 percent signaling banks are lending, easing fears of a looming recession. The ECB plans to maintain the current level of lending by offering banks cheap lines of credit further stimulating the economy Prime Minister Theresa May announced late last week she would step down on June 7th proclaiming she has done "everything I can" to push the withdrawal from the European Union Forward.  Given the departure of Theresa May parliament has the opportunity to negotiate a new withdrawal agreement with their terms if the EU will allow it.  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, HUBS Group Funding (Jersey) Ltd. (USD) 4.125% 4/15/2026 made some analysts' 'Conviction Buy' lists. (See the chart for HUBS Group Funding bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.532 1.590 -79.1  
Belgium  10 0.370 0.374 -195.3  
France  10 0.279 0.282 -204.4  
Germany  10 -0.114 -0.116 -243.7  
Italy  10 2.554 2.642   23.1
Japan  10 -0.069 -0.060 -239.2  
Netherlands  10 0.076 0.078 -224.7  
Portugal  10 0.972 1.011 -135.1  
Spain  10 0.823 0.857 -150.0  
Sweden  10 0.050 0.050 -227.3  
U.K.  10 0.958 0.954 -136.5  
U.S.  10 2.323 2.323 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): France 29 bp and UK 30 bp. Sovereign wideners (5Y): Belgium 23 bp and Spain 54 bp.

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New Issuance

New Issues New Issues [Continued]

1. Sato-OYJ (EUR) 1.375% 5/31/2024 (05/28/2019): 350MM Senior Unsecured Notes.

2. Cooperatieve Rabobank U.A. (CHF) 0.25% 11/25/2027 (05/28/2019): 185MM Senior Unsecured Notes, Price at Issuance 100.125, Yielding .24%.


ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 05/28/2019, 131.55 NAV as of 05/28/2019, 103.14
Daily NAV Change (%) -0.05% Daily NAV Change (%) -0.05%

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 -0.240%, as of 05/27/2019

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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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