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European Bond Research – April 11, 2019

Posted on April 11, 2019
EU GRANTS BRITAIN  SIX MORE MONTHS TO LEAVE THE BLOC EXTENDING THE DEADLINE INTO OCTOBER, ALTHOUGH, IT COULD HAPPEN QUICKER ACCORDING TO THERESA MAY. “There is huge frustration from many people that I had to request this extension, but it was the logical thing to do,” stated Theresa May. German Chancellor, Merkel mentioned, “An orderly exit by Britain can be best ensured if we prolong the duration of a deal.” The ECB will keep its monetary policy as accommodative as possible to ensure positive growth across the economy. The ECB hinted they will leave interest rates unchanged amid trade tensions and uncertainty around Brexit. The UK 10-year Gilt increased five-basis points.  FTSE 100  -0.09%, STOXX Europe 600 +0.13%, CAC 40 +0.83%, German DAX +0.34%.

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ECB PRESIDENT MARIO DRAGHI “UNDERSCORED THE RISKS FACING THE EUROZONE ECONOMY, REINFORCING HIS STANCE ON FURTHER STIMULUS” TO PREVENT THE REGION FROM SLIPPING INTO RECESSION. The pound traded flat around $1.31 due to the Brexit deadline extension. Currency markets are waiting for key economic data from China which will be released on Friday. Among European investment grade bonds showing a concurrence of top price gains at appreciable volumes traded,  Petrobras Global Finance BV (USD) 8.75% 5/23/2026 made some analysts’ ‘Conviction Buy’ lists. (See the chart for  Petrobras Global Finance bonds below). Niral Mehta (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.885 1.909 -59.5
Belgium 10 0.419 0.454 -206.0
France 10 0.321 0.348 -215.9
Germany 10 -0.023 -0.008 -250.2
Italy 10 2.410 2.432 -6.9
Japan 10 -0.056 -0.045 -253.5
Netherlands 10 0.058 0.086 -242.1
Portugal 10 1.170 1.195 -130.9
Spain 10 1.039 1.081 -144.0
Sweden 10 0.221 0.238 -225.9
U.K. 10 1.097 1.106 -138.2
U.S. 10 2.479 2.501

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 43 bp and Dubai 133 bp. Sovereign wideners (5Y): Belgium 25 bp and Denmark 11 bp.

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New Issuance

New Issues New Issues [Continued]
1. Yorkshire Building Society (GBP) 3% 4/18/2025 (04/10/2019):275MM Senior Unsecured Notes, Price at Issuance 99.976.

2. Atos SE (EUR) 1.125% 4/17/2026 (04/10/2019): 50MM Senior Unsecured Notes.

3. Volkswagen Financial Services NV (SEK) FLT% 4/16/2021 (04/10/2019): 1000MM Senior Unsecured Notes.

ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 04/11/2019, 131.46 NAV as of 04/11/2019, 104.24
Daily NAV Change (%) -0.06% Daily NAV Change (%) +0.13%

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 ratecurrently 7.8% (seasonally adjusted, February 2019)
  • Eurostat’s quarterly GDP: 0.2% (2018 Q3 Final)
  • 6-month Euribor: current value –0.231%, as of 04/10/2019

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