European Bond Research - August 29, 2019

EQUITIES ROSE SHARPLY after China announced there will not be any immediate retaliation against the new U.S. tariffs. "China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war." FTSE 100 +0.78%, German DAX +0.70%, CAC 40 +1.04%, STOXX Europe 600 +0.72%.  The 10-year Gilt fell 0.3 basis points.
 

SHARES OF INDUSTRIAL GIANT BOUYGUES ADVANCED 5.7 PERCENT following better than expected earnings and confirmed its 2019 fiscal year target. Bouygues bonds traded in higher than usual volume, in particular, the Bouygues (EUR) 1.375% 6/7/2027. 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,  Pernod Ricard SA (USD) 4.25% 7/15/2022 made some analysts' 'Conviction buy' lists. (See the chart for Pernod Ricard SA bonds below). Corey Mahoney

 

LATEST NEWS: Top moves, sovereign tighteners (5Y): Italy 172 bp and Spain 40 bp. Sovereign wideners (5Y):  Finland 11 bp and Ireland 33 bp.

New Issues	New Issues [Continued]
1. KBC Ifima NV (NZD) 1.2% 10/3/2022 (08/28/2019): 100MM Senior Preferred Security, Price at Issuance 100.75, Yielding .95%. 2. Total Capital SA (GBP) 1.405% 9/3/2031 (08/28/2019): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.405%.

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 08/29/2019, 135.5 NAV as of 08/29/2019, 106.00 Daily NAV Change (%) -0.14% Daily NAV Change (%) +0.26%

OVERALL EUROPEAN CREDIT MARKET:
The euro-zone economy shows signs of negative momentum, weakening credit rating quality, and uncertainty regarding the outcome of Brexit. Closely watched indicators and rates:

• Eurostat's unemployment rate: currently 7.5% (seasonally adjusted, May 2019)
• Eurostat's quarterly GDP: 0.4% (2019 Q1)
• 6-month Euribor: current value -0.427%, as of 08/28/2019

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