European Bond Research - May 30, 2019

Posted by Corey Mahoney on May 30, 2019 12:30:00 PM
TRADING REVENUES SLIPPED FROM THE 12 LARGEST GLOBAL INVESTMENTS BANKS in March hindered by a steep decline in trading government paper. Revenues from trading Government debt are down 12 percent year-over-year due to lackluster rates in the Asian and European Markets. The 10-year Gilt advanced 0.7 basis points. FTSE 100 +0.55%, German DAX +0.48%, CAC 40 +0.42%, STOXX Europe 600 +0.41%.

unnamed - 2019-05-29T134004.067

BUSINESS CONFIDENCE IN EUROPE TOOK AN ACUTE HIT among business leaders over the past six-months as uncertainty looms with Brexit.  In particular, British businesses leader confidence dipped to 39 percent, “Hard Brexit is becoming more of a reality” according to Dave Brosnan, CEO of CAN Hardy.  Car production in the UK plummeted 44.5 percent year-over-year as factories shut down preparing for a Brexit that never came.  The “untold damage” of a prolonged departure is becoming evident of the Governments “mishandling” of the exit. 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, Vodafone Group PLC (USD) 2.5% 9/26/2022 made some analysts' 'Conviction Buy' lists. (See the chart for Vodafone Group Plc bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.545 1.532 -72.2  
Belgium  10 0.343 0.368 -192.4  
France  10 0.252 0.272 -201.4  
Germany  10 -0.158 -0.129 -242.4  
Italy  10 2.690 2.585   42.3
Japan  10 -0.071 -0.069 -233.8  
Netherlands  10 0.040 0.062 -222.7  
Portugal  10 0.919 0.956 -134.8  
Spain  10 0.792 0.810 -147.5  
Sweden  10 0.025 0.031 -224.2  
U.K.  10 0.919 0.958 -134.8  
U.S.  10 2.267 2.326 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): France 29 bp and UK 30 bp. Sovereign wideners (5Y): Spain 53 bp and Italy 228 bp.

New Issuance

New Issues New Issues [Continued]

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

2. BNP Paribas Issuance BV (EUR) 0% 12/27/2019 (05/29/2019):100MM Secured Notes, Price at Issuance 100, Yielding 0%.

3. Met Life Global Funding Inc. (CHF) 0.125% 6/11/2027 (05/29/2019): 225MM Secured Notes, Price at Issuance 100, Yielding .13%.


ADI Indexes

iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 05/30/2019, 131.64 NAV as of 05/30/2019, 102.99
Daily NAV Change (%) +0.1%  Daily NAV Change (%) +0.17%

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 -0.245%, as of 05/29/2019

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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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