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European Bond Research – April 8, 2019

Posted on April 8, 2019
WEAK TRADE DATA CASTING DOUBT ON GERMANY’S ECONOMIC STRENGTH. German exports and imports declined more than expected in February dropping by an aggregate of 1.3 percent in February. German exporters are suffering from a slowing world economy, trade disputes and Brexit angst. The trade surplus edged up to 18.7 billion euros from a revised 18.6 billion euros the previous month. German industrial orders fell by the biggest margin in more than two years. Brexit deadline is looming and a “no-deal Brexit makes no sense and is the worst possible solution,” stated European Agriculture Commissioner, Phil Hogan. The UK 10-year Gilt declined one-tenth of a basis point.  FTSE 100  +0.07%, STOXX Europe 600 -0.19%, CAC 40 +0.38%, German DAX -0.39%.

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JAGUAR LAND ROVER BEGINS Brexit-Linked plant shutdowns. The automotive firm reported a fall in global sales by 6% hit by a sharp decline in China. Automotive firms face several possible risks under a “disorderly Brexit, including delays to the supply of parts and finished models, new customs bureaucracy, the need to recertify cars and an up to 10 percent tariff” on finished vehicles. ADI (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,  HSBC Holdings PLC (USD) 3.9% 5/25/2026 made some analysts’ ‘Conviction Buy’ lists. (See the chart for  HSBC Holdings PLC bonds below). Corey Mahoney (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.913 1.904 -59.0
Belgium 10 0.456 0.462 -204.6
France 10 0.362 0.369 -214.0
Germany 10 0.010 -0.004 -249.2
Italy 10 2.478 2.513 -2.4
Japan 10 -0.029 -0.039 -253.2
Netherlands 10 0.096 0.086 -240.7
Portugal 10 1.255 1.263 -124.8
Spain 10 1.100 1.109 -140.3
Sweden 10 0.247 0.245 -225.5
U.K. 10 1.118 1.087 -138.5
U.S. 10 2.503 2.513

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Belgium 25 bp and Finland 13 bp. Sovereign wideners (5Y): Denmark 11 bp and Dubai 135 bp.

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New Issuance

New Issues New Issues [Continued]
1. Caisse Centrale du Credit Immobilier de France SA (EUR) 0.125% 3/1/2021 (04/08/2019): 350MM Senior Preferred Security.

ADI Indexes

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iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 04/08/2019, 131.13 NAV as of 04/08/2019, 104.00
Daily NAV Change (%) -0.08% Daily NAV Change (%) -0.03%

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 –0.231%, as of 04/05/2019

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