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European Bond Research – April 5, 2019

Posted on April 5, 2019
EUROPEAN EQUITIES GAINED following the release of a positive U.S. jobs report signaling the U.S. economy remains strong despite global economies faltering.  In the European front, German industrial output increased 0.7 percent in February aided by a flood of construction activity, however, “The industrial sector is expected to remain subdued given the weak development in orders and the gloomier business climate” The UK 10-year Gilt rose 3.3 basis points.  FTSE 100  +0.78%, STOXXEurope 600 +0.19%, CAC 40 +0.38%, German DAX +0.21%.

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A STAGGERING $9.7 TRILLION OF GLOBAL DEBT IS YIELDING LESS THAN 0%.  The amount has increased by more than $3.5 billion since September as dovish tones across global central banks make investors turn to safe-haven assets.  “The financial world is truly upside down,” said Peter Boockvar, chief investment officer of Bleakley Advisory Group.  German bond yields have plummeted over the past six-months losing 0.5 basis points adding the rise of negative yielding government paper globally. Preliminary U.K. housing data suggests growth has cooled in the first quarter of 2019 to 2.3 percent from 2.6 percent one-year-prior amid political uncertaintiesADI (Advantage Data Inc.) corporate-bond index data showed a net daily yield increment for high-grade versus high-yield constituents. Among European investment grade bonds showing a concurrence of top price gains at appreciable volumes traded, UBS Group Funding (Switzerland) AG (USD) VAR% PERP made some analysts’ ‘Conviction Buy’ lists. (See the chart for  UBS Group Funding bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.904 1.851 -60.3
Belgium 10 0.462 0.477 -204.5
France 10 0.369 0.393 -213.8
Germany 10 -0.004 0.011 -251.2
Italy 10 2.513 2.545 0.6
Japan 10 -0.039 -0.050 -254.6
Netherlands 10 0.086 0.099 -242.1
Portugal 10 1.263 1.269 -124.4
Spain 10 1.109 1.140 -139.8
Sweden 10 0.245 0.247 -226.2
U.K. 10 1.087 1.098 -142.1
U.S. 10 2.507 2.521

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Ireland 35 bp and France 28 bp. Sovereign wideners (5Y): Sweeden 15 bp and China 42 bp.

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New Issuance

New Issues New Issues [Continued]
1. Ergon Inc. (EUR) 1.875% 4/11/2025 (04/04/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.674, Yielding 1.933%.

2. Norsk Hydro ASA (EUR) 1.125% 4/11/2025 (04/04/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.265, Yielding 1.253%.

ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 04/05/2019, 131.2 NAV as of 04/05/2019, 103.99
Daily NAV Change (%) +0.03% Daily NAV Change (%) +0.12%

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, January 2019)
  • Eurostat’s quarterly GDP: 0.2% (2018 Q3 Final)
  • 6-month Euribor: current value –0.230%, as of 04/04/2019

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