European Bond Research - May 31, 2019

Posted by Corey Mahoney on May 31, 2019 12:44:56 PM
NEARLY HALF OF EURO GOVERNMENT DEBT is yielding less than zero percent, the Netherlands is the latest country to see negative yields. The proportion of negative yielding debt hit its highest level since September 2016 tallying $3.71 trillion euros or 48 percent. Elevated trade tensions, Brexit uncertainty, and fears over Italy’s budget resulted in the accelerating trend. The 10-year Gilt fell 2.1 basis points.  FTSE 100 -0.91%, German DAX -1.58%, CAC 40 -1.14%, STOXX Europe 600 -1.05%.

unnamed - 2019-05-29T134004.067

RETAIL SALES IN GERMANY BOUNCED BACK in April growing 4 percent year-over-year exceeding expectations reversing a 2 percent decline in March.  Easter had a "positive effect" and clothing exports were able to "compensate for the slight decline in domestic retail sales through strong exports."  UK house prices increased at a slower pace in May than previously forecasted growing by 0.6 percent year-over-year dropping 0.2 percent from last month.  Brexit continues to hinder the housing market, "The trend likely won’t improve in the next couple of months, given the political deadlock in Westminster." 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, Lloyds Banking Group PLC (USD) 4.55% 8/16/2028 made some analysts' 'Conviction Buy' lists. (See the chart for Lloyds Banking Group PLC bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.543 1.493 -68.1  
Belgium  10 0.320 0.318 -190.3  
France  10 0.242 0.232 -198.2  
Germany  10 -0.171 -0.175 -239.5  
Italy  10 2.651 2.647   42.7
Japan  10 -0.081 -0.093 -230.5  
Netherlands  10 0.022 0.019 -220.2  
Portugal  10 0.862 0.850 -136.2  
Spain  10 0.765 0.739 -145.9  
Sweden  10 0.005 0.005 -221.9  
U.K.  10 0.901 0.896 -132.3  
U.S.  10 2.224 2.264 ...

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Germany 11 bp and UK 30 bp. Sovereign wideners (5Y): Finland 12 bp and Sweden 11 bp.

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New Issuance

New Issues New Issues [Continued]

1. Nordea Bank AB (USD) 2.815% 6/7/2024 (05/31/2019): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.82%.

2. OP Corporate Bank (USD) FLT% 6/5/2020 (05/31/2019): 200MM Senior Unsecured Notes.


ADI Indexes

unnamed - 2019-05-28T172049.509

iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 05/31/2019, 131.71 NAV as of 05/31/2019, 102.55
Daily NAV Change (%) +0.11%  Daily NAV Change (%) -0.33%

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 -0.247%, as of 05/30/2019

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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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