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European Bond Research – April 25, 2019

Posted on April 25, 2019
EUROPEAN EQUITIES EDGED LOWER ON THURSDAY following mixed earnings and weak economic data. Commerzbank in Germany fell 3 percent after Deutche bank decided to discontinue early talks regarding a merger or acquisition. Barclays sank 4 percent after reporting disappointing earnings revealing first-quarter profit declined 10 percent year-over-year. The 10-year Gilt settled 2.1 basis points lower. FTSE 100 -0.73%, German DAX -0.38%, CAC 40 -0.47%, STOXX Europe 600 -0.35%.

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PRELIMINARY U.K. RETAIL SALES IMPROVED IN APRIL for the first time in five months signaling consumer sentiment has ticked-up despite no progress regarding Brexit.  “It’s encouraging to see retailers with more of a spring in their step than in recent months,” Rain Newton-Smith, the CBI’s chief economist, said.  Data released last week also revealed a spike in retail sales volume not seen in nearly two-and-half years.  Britain government is hopeful to leave the bloc in May before the new European parliament takes their seats July.  David Lidington stated “I don’t think this can be allowed to drift for much longer” expressing the concern of many British businesses.  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,   Actavis Funding SCS (USD) 3% 3/12/2020 made some analysts’ ‘Conviction Buy’ lists. (See the chart for Actavis Funding SCS bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.796 1.905 -72.7
Belgium 10 0.443 0.492 -208.0
France 10 0.348 0.396 -217.5
Germany 10 -0.010 0.044 -253.3
Italy 10 2.626 2.678 10.3
Japan 10 -0.036 -0.030 -255.9
Netherlands 10 0.168 0.219 -235.5
Portugal 10 1.171 1.204 -135.2
Spain 10 1.070 1.113 -145.3
Sweden 10 0.238 0.277 -228.5
U.K. 10 1.179 1.227 -134.4
U.S. 10 2.523 2.569

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): France 28 bp and UK 29 bp. Sovereign wideners (5Y): India 93 bp and Spain 59 bp.

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New Issuance

New Issues New Issues [Continued]
1. Unione di Banche Italiane SCpA (EUR) 1% 11/30/2022 (04/24/2019): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1%.

2. Royal Bank of Canada (EUR) 0.25% 5/2/2024 (04/24/2019):500MM Senior Unsecured Notes, Price at Issuance 99.476, Yielding .356%.

ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 04/25/2019, 131.95 NAV as of 04/25/2019, 104.27
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 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 04/24/2019

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