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European Bond Research – April 24, 2019

Posted on April 24, 2019

GERMAN BUSINESS CONFIDENCE PLUMMETS to the lowest level in three years implying the European economy is experiencing a further slowdown. The business index dipped to 103.3 despite an estimate of 103.6, “Companies are less satisfied with their current business situation”. France’s manufacturing confidence dropped for the first time in five months hitting a two-and-a-half year low. Equities pulled back from eight-month highs as investors are concerned with China slowing the stimulus. The 10-year Gilt sank 4.5 basis points. FTSE 100 -0.63%, German DAX +0.52%, CAC 40 -0.36%, STOXX Europe 600 -0.08%.

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BRITISH EMPLOYERS ARE BRACING FOR BREXIT, but in the meantime they continue to hire increasing their headcounts. Firms are hiring a large number of temporary workers in anticipation of any radical shifts due to Brexit, “The more positive figures on hiring for temporary workers suggest that many businesses are turning to agency work to help them navigate the unpredictability they currently face,” chief executive Niel Carberry at REC. Government borrowing in the U.K. sank to a 17 year low clocking in at 24.7 billion GBP, a decline of 17.2 billion GBP from the previous year. 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, HSBC Holdings PLC (USD) 5.25% 3/14/2044 made some analysts’ ‘Conviction Buy’ lists. (See the chart for HSBC Holdings PLC bonds below). Corey Mahoney (cmahoney@advantagedata.com).

Sovereign-Debt Snapshot

Country	Maturity (Y)	Yield (%)	Previous (%)	Spread (bp)
Australia	10	1.905	1.960	-66.6
Belgium	10	0.492	0.462	-207.9
France	10	0.396	0.370	-217.5
Germany	10	0.044	0.026	-252.7
Italy	10	2.678	2.451		10.7
Japan	10	-0.030	-0.026	-260.1
Netherlands	10	0.219	0.102	-235.2
Portugal	10	1.204	1.166	-136.7
Spain	10	1.113	1.061	-145.8
Sweden	10	0.277	0.275	-229.4
U.K.	10	1.227	1.198	-134.4
U.S.	10	2.571	2.593	…

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Denmark 11 bp and Dubai 135 bp. Sovereign wideners (5Y): Germany 12 bp and Korea 31 bp.

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New Issuance

New Issues	New Issues [Continued]
1. Davide Campari-Milano SPA (EUR) 1.655% 4/30/2024 (04/23/2019): 150MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.66%. 2. Mediobanca Di Credito Finanz SpA (USD) 3% 4/26/2022 (04/23/2019): 55MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3%. 3. Wendel (EUR) 1.375% 4/26/2026 (04/23/2019): 300MM Senior Unsecured Notes.

New Issues

New Issues [Continued]

1. Davide Campari-Milano SPA (EUR) 1.655% 4/30/2024 (04/23/2019): 150MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.66%.

2. Mediobanca Di Credito Finanz SpA (USD) 3% 4/26/2022 (04/23/2019): 55MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3%.

3. Wendel (EUR) 1.375% 4/26/2026 (04/23/2019): 300MM Senior Unsecured Notes.

ADI Indexes

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DATA CHECK:

iShares Core EUR UCITS	iShares Euro High Yield UCITS
NAV as of 04/24/2019, 132.09	NAV as of 04/24/2019, 104.62
Daily NAV Change (%) +0.31%	Daily NAV Change (%) -0.11%

OVERALL EUROPEAN CREDIT MARKET:
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 7.8% (seasonally adjusted, February 2019)
Eurostat’s quarterly GDP: 0.2% (2018 Q3 Final)
6-month Euribor: current value –0.230%, as of 04/23/2019

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

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