European Bond Research – July 28, 2020

MARKETS LOWER AS MCDONALDS AND 3M REPORT LOUSY EARNINGS. CORPORATE EARNINGS REPORTS ARE ROLLING OUT AND ILLUSTRATING THE WIDE ECONOMIC DESTRUCTION COVID HAS PRODUCED.  FTSE 100 +0.4%, German DAX -0.03%, CAC 40 -0.22%, STOXX Europe 600 +0.47%.  The 10-year Gilt was DOWN .2 bps.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 16.8 MILLION+ CASES AND 661000+ DEATHS.  (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,  LYB International Finance BV (USD) 4.875% 3/15/2044 made some analysts ‘Conviction buy’ lists. (See the chart for  LYB International Finance BV bonds below). Pierre Robert

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.12% 0.67% 3.41% 10.50% 4.03% 11.34% Mining -0.13% 0.35% 0.43% 21.58% 0.02% 5.05% Manufacturing -0.01% -0.92% 0.66% 6.99% -1.26% 0.50% Transportion, Communication, Electric/Gas 0.06% 0.47% 2.35% 5.34% 3.28% 8.54% Wholesale 0.44% 0.28% 2.13% 8.08% 2.60% 11.08% Retail 0.19% -0.61% 2.74% -6.54% -22.69% -14.35% Finance, Insurance, Real-Estate 0.10% 0.77% 1.98% 8.00% 3.79% 9.92% Services -0.04% 0.78% 4.12% 9.49% -0.11% 5.80% Energy -0.16% -1.41% -1.02% 38.69% -16.68% -23.33%   Total returns (non-annualized) by rating, market weighted.

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 44.16, Belgium 16.73. Sovereign wideners (5Y):  Italy 153.03 and Greece 156.8.

New Issues

New Issues [Continued]

1. Raiffeisen Bank Intl. AG (EUR) 0.335% 8/5/2022 (07/27/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding .34%. 2. RLB Oberoesterreich (EUR) VAR% 8/18/2028 (07/27/2020): 50MM Subordinated Notes, Price at Issuance 98.6. 3. Covivio (EUR) 1.625% 6/23/2030 (07/27/2020): 500MM Senior Unsecured Notes. 4. UBS Group AG (USD) VAR% 7/30/2024 Reg S (07/27/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100. 5. UBS Group AG (USD) VAR% 7/30/2024 144A (07/27/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100. 6. UBS Group AG (USD) VAR% 1/30/2027 Reg S (07/27/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100. 7. UBS Group AG (USD) 1.364% 1/30/2027 144A (07/27/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.36%. 8. Codere Finance (EUR) 12.75% 9/30/2023 Reg S (07/27/2020): 85MM Secured Notes, Price at Issuance 97, Yielding 13.93%. 9. Kommuninvest I Sverige AB (JPY) 6.2% 8/18/2021 (07/28/2020): 250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.2%. 10. Kommuninvest I Sverige AB (JPY) 7.8% 8/18/2021 (07/28/2020): 250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.8%.

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 07/28/2020, 133.48 NAV as of 07/28/2020, 98.54 Daily NAV Change (%) +0.09% Daily NAV Change (%) -0.29%

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: EXPECTED TO SOAR.
• Eurostat’s quarterly GDP: EXPECTED TO CONTRACT.
• 6-month Euribor: current value –0.375%, as of 07/27/2020.

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