European Bond Research – March 10, 2020

EUROPEAN HAD ANOTHER DOWN DAY AS ITALY IS IN A TOTAL LOCKDOWN. THE CORONAVIRUS IS EXPANDING RAPIDLY THROUGHOUT EUROPE AND SWAMPING HOSPITALS. FTSE 100 -1.62%, German DAX -1.52%, CAC 40 -1.90%, STOXX Europe 600 -1.14%.  The 10-year Gilt was up 0.8 bps.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 113000+ CASES AND 4000+ DEATHS. THE VIRUS SEEMS TO BE SLOWING DOWN IN CHINA AS NEW CASES AND DEATHS SEEM TO BE ACCELERATING INTERNATIONALLY.   (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,  Bombardier Inc. (USD) 7.5% 12/1/2024 Reg S made some analysts ‘Conviction buy’ lists. (See the chart for Bombardier Inc. bonds below). Pierre Robert

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -2.07% -1.97% -3.78% -1.92% -2.77% 12.99% Mining -4.17% -5.42% -6.49% -3.80% -4.64% 4.50% Construction -1.13% -2.75% -3.27% 0.15% -0.86% 5.04% Manufacturing -1.22% -1.91% -0.74% 4.64% 3.02% 3.88% Transportion, Communication, Electric/Gas -1.71% -2.88% -4.05% -1.05% -2.73% 8.84% Wholesale -1.21% -0.39% 0.57% 3.08% 1.73% 15.90% Retail -1.06% 0.69% 3.86% 9.23% 8.95% 27.95% Finance, Insurance, Real-Estate -1.45% -1.30% -2.25% 1.67% 0.27% 10.96% Services -1.32% -2.00% -4.02% -2.22% -3.26% 4.75% Energy -2.82% -5.29% -8.81% -9.39% -9.57% -13.94%   Total returns (non-annualized) by rating, market weighted.

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 44.36, Greece 173.30. Sovereign wideners (5Y):  Finland 10.83 and Ireland 33.53.

New Issues	New Issues [Continued]
1. Sidecu SL (EUR) 5% 3/18/2025 (03/09/2020): 70MM Secured Notes, Price at Issuance 100. 2. Starbucks Corp. (USD) 2% 3/12/2027 (03/10/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.591, Yielding 2.06%.

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 03/10/2020, 131.17 NAV as of 03/10/2020, 96.41 Daily NAV Change (%) -0.61% Daily NAV Change (%) -0.09%

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, November 2019)
• Eurostat’s quarterly GDP: 0.4% (2019 Q4)
• 6-month Euribor: current value –0.421%, as of 03/10/2020.

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