European Bond Research – June 19, 2020

MARKETS STARTED WAY UP BUT GAVE UP GAINS AS CORONAVIRUS FEARS SAPPED UP THE MARKET BULLS CHARGE.  MARKETS ENDED SLIGHTLY HIGHER FOR THE WEEK.  FTSE 100 +1.1%, German DAX +0.4%, CAC 40 +0.42, STOXX Europe 600 +0.6%.  The 10-year Gilt was up 0.8 bps.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 8.7+ MILLION+ CASES AND 46000+ DEATHS. THE VIRUS SEEMS TO BE DOWN TO A TRICKLE IN CHINA AND EUROPE IS STARTING TO OPEN UP AS CASES START TO GET UNDER CONTROL.   (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 -0.13% -0.14% 4.38% 26.87% 1.29% 9.30% Mining 0.09% 0.09% 13.57% 18.86% -4.40% 3.33% Manufacturing -0.24% 0.10% 4.10% 13.17% -1.77% 1.40% Transportion, Communication, Electric/Gas -0.10% 0.46% 2.20% 11.33% 1.59% 8.77% Wholesale 0.01% -0.02% 2.11% 6.74% 0.07% 10.01% Retail -3.48% -0.07% 34.74% -11.36% -17.80% -5.07% Finance, Insurance, Real-Estate 0.03% 0.64% 4.23% 8.09% 2.06% 10.46% Services -0.20% 0.54% 5.36% 14.66% -3.36% 4.42% Energy -4.19% -6.07% 19.31% 96.64% -21.94% -27.06%   Total returns (non-annualized) by rating, market weighted.

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 48.06, Belgium 22.83. Sovereign wideners (5Y):  Italy 168.22 and Greece 148.62.

New Issues

New Issues [Continued]

1. Eustream A.S. (EUR) 1.625% 6/25/2027 (06/18/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.574, Yielding 1.69%. 2. Barclays Bank PLC (USD) 0% 7/2/2050 (06/18/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 0%. 3. Samhallsbyggnadsbolaget (NOK) FLT% 6/26/2025 (06/18/2020): 500MM Senior Unsecured Notes. 4. Synthomer PLC (EUR) 3.875% 7/1/2025 Reg S (06/18/2020): 520MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%. 5. Willow No. 2 Ireland PLC (USD) 1.85% 6/30/2021 (06/18/2020): 100MM Secured Notes, Price at Issuance 100, Yielding 1.85%. 6. Carmila (EUR) 3% 6/26/2029 (06/18/2020): 100MM Senior Unsecured Notes. 7. United Utilities Water (GBP) 2% 7/3/2033 (06/18/2020): 50MM Senior Unsecured Notes, Price at Issuance 106.088, Yielding 1.482%. 8. BUPA Finance PLC (GBP) 1.75% 6/14/2027 (06/18/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.694. 9. Banco Santander SA (EUR) 1.125% 6/23/2027 (06/18/2020): 1000MM Senior Non Preferred Notes, Price at Issuance 99.946, Yielding 1.133%. 10. European Investment Bank (EUR) 0.01% 11/15/2035 (06/18/2020): 1000MM Unsecured Notes.

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 06/19/2020, 132.02 NAV as of 06/19/2020, 97.52 Daily NAV Change (%) +0.2% Daily NAV Change (%) -0.04%

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 –0.228%, as of 06/18/2020.

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