European Bond Research – January 7, 2020

EQUITY MARKETS ARE MIXED TO UP. When and where Iran hits next is anyone’s guess. Markets are calmer and will wait for the next hit on the market.   FTSE 100 -0.02%, German DAX +0.78%, CAC 40 +0.11%, STOXX Europe 600 +0.31%.  The 10-year Gilt gained 2.5 basis points.

BOLTON IS READY TO TESTIFY MAKING TRUMP’S QUICK AQUITAL ALL BUT NOT HAPPENING. Trial is likely being pushed back to later in January. More testimony likely to happen later in January.  (Advantage Data Inc.). Extensive corporate-bond index data showed a net daily grade 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,  Deutsche Bank AG (USD) 4.5% 4/1/2025  made some analysts ‘Conviction buy’ lists. (See the chart for Deutsche Bank AG bonds below). Pierre Robert

LATEST NEWS: Top moves, sovereign tighteners (5Y): Italy 128.63 and Spain 40.36. Sovereign wideners (5Y):  Finland 10.83 and Ireland 22.01.

New Issues

New Issues [Continued]

1. Cooperatieve Rabobank U.A. (GBP) 1.25% 1/14/2025 (01/06/2020): 500MM Senior Non Preferred Notes, Price at Issuance 99.411, Yielding 1.373%. 2. Santander UK PLC (USD) 2.1% 1/13/2023 (01/06/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.939, Yielding 2.12%. 3. BNP Paribas (USD) 3.052% 1/13/2031 144A (01/06/2020): 2000MM Senior Non Preferred Notes, Price at Issuance 100, Yielding 3.05%.

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 01/07/2020, 134.59 NAV as of 01/07/2020, 105.70 Daily NAV Change (%) -0.04% Daily NAV Change (%) +0.10%

OVERALL EUROPEAN CREDIT MARKET:
The euro-zone economy shows signs of negative momentum, weakening credit rating quality, and uncertainty regarding the outcome of Brexit. Closely watched indicators and rates:

• Eurostat’s unemployment rate: currently 7.5% (seasonally adjusted, May 2019)
• Eurostat’s quarterly GDP: 0.4% (2019 Q1)
• 6-month Euribor: current value –0.325%, as of 01/06/2020

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