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European Bond Research – April 30, 2019

Posted on April 30, 2019
EUROZONE ECONOMY EXPANDED in the first quarter of 2019 shaking off a rough finish to 2018 easing fears of a recession. GDP rose 1.2 percent year-over-year with preliminary estimates of 0.4 percent, analysts expect the GDP to waver around 0.3 percent for the remainder of the year. The 10-year Gilt rose 4.2 basis points. FTSE 100 -0.53%, German DAX -0.15%, CAC 40 -0.34%, STOXX Europe 600-0.23%.

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THE UNEMPLOYMENT RATE DECLINES TO 7.7% IN THE EUROZONE in March marking the lowest level since September 2008.  “The economy remains solid enough not to need extra stimulus… In that regard, wait-and-see remains the most likely ECB monetary policy stance” stated Vanden Houte from ING. Germany’s unemployment rate hovered at 30 year lows of 4.9 percent keeping consumer confidence in an upbeat tone.  U.K. car output plummeted 14 percent in March marking the tenth month of declines a clear consequence of the current Brexit stalemate.  “Just a few years ago, industry was on track to produce 2 million cars by 2020”, in 2018 output clocked in at 1.52 million units and at the current rate in 2019 1.36 units will be produced. 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) 4.55% 3/15/2035 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 1.800 1.788 -73.7
Belgium 10 0.457 0.449 -208.1
France 10 0.364 0.354 -217.4
Germany 10 0.007 -0.018 -253.1
Italy 10 2.582 2.583 4.5
Japan 10 -0.029 -0.047 -256.6
Netherlands 10 0.181 0.165 -235.6
Portugal 10 1.124 1.128 -141.4
Spain 10 1.010 1.032 -152.7
Sweden 10 0.147 0.127 -239.0
U.K. 10 1.159 1.145 -137.8
U.S. 10 2.537 2.500

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Denmark 11 bp and Germany 12 bp. Sovereign wideners (5Y): Ireland 30 bp and Belgium 23 bp.

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New Issuance

New Issues New Issues [Continued]
1. Canadian Imperial Bank of Commerce (EUR) 0.375% 5/3/2024 (04/30/2019): 1000MM Senior Unsecured Notes.

2. Guardian Life Global Funding (USD) 2.9% 5/6/2024 Reg S (04/30/2019): 300MM Secured Notes, Price at Issuance 99.894, Yielding 2.92%.

ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 04/30/2019, 132.11 NAV as of 04/30/2019, 104.33
Daily NAV Change (%) +0.08% 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 7.7% (seasonally adjusted, March 2019)
  • Eurostat’s quarterly GDP: 0.4% (2019 Q1 Preliminary)
  • 6-month Euribor: current value –0.231%, as of 04/29/2019

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