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European Bond Research – April 29, 2019

Posted on April 29, 2019
EUROPEAN EQUITIES WHIPSAW on data revealing economic sentiment declined for the tenth straight month. The euro edged higher against the dollar meanwhile lost against the British pound. The 10-yearGilt settled 1.3 basis points higher. FTSE 100 +0.19%, German DAX +0.09%, CAC 40 +0.14%, STOXX Europe 600 +0.07%.

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BREXIT DELAY PUTS BANKERS AT EASE FOR THE TIME BEING allowing the Bank of England to focus on the condition of the economy rather than fearing the worst with Brexit. George Buckley an economist at Nomura economist predicts a rate hike in November, “While we see the need to raise interest rates slowly … the Bank of England is likely to sit on its hands until more clarity on the Brexit outcome is received”.  The European Union announced they accepted an offer by Visa and MasterCard trimming fees related to payments made on cards outside the bloc.  Businesses ultimately carry the cost of the transaction. “This, together with our January 2019 decision on Mastercard’s cross-border card payment services, will lead to lower prices for European retailers to do business, ultimately to the benefit of all consumers”ADI (Advantage Data Inc.) extensive corporate-bond index data showed a net daily yield increment for high-grade versus high-yield constituents. High-yield bonds edged out high-grade debt as of 3 PM, London time.  Among European high-yield 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 BV bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.788 1.796 -71.7
Belgium 10 0.449 0.469 -205.6
France 10 0.354 0.371 -215.1
Germany 10 -0.018 -0.006 -252.3
Italy 10 2.583 2.695 7.8
Japan 10 -0.047 -0.029 -255.2
Netherlands 10 0.165 0.176 -234.0
Portugal 10 1.128 1.186 -137.7
Spain 10 1.032 1.092 -147.3
Sweden 10 0.127 0.157 -237.8
U.K. 10 1.145 1.157 -136.0
U.S. 10 2.505 2.536

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): France 27 bp and Korea 31 bp. Sovereign wideners (5Y): Finland 12 bp and Spain 58 bp.

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New Issuance

New Issues New Issues [Continued]
1. ACS Actividades de Construccion y Servicios SA (EUR) FLT% 6/28/2023 (04/29/2019): 50MM Senior Unsecured Notes, Price at Issuance 100.

2. Cie De St-Gobain (EUR) 1.875% 5/3/2035 (04/29/2019): 100MM Senior Unsecured Notes.

ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 04/29/2019, 132.01 NAV as of 04/29/2019, 104.35
Daily NAV Change (%) -0.02% Daily NAV Change (%) -0.02%

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 –0.229%, as of 04/26/2019

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