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European Bond Research – March 18, 2019

Posted on March 18, 2019
CME STATED, EURO TRADING HAS MOVED TO AMSTERDAM ahead of Brexit; full migration will be completed by April 1st. CBOE Europe is “closely monitoring political discussions and would react as quickly as possible” that would alter the April 1st launch date. UK will produce a new indicator called a VAT index, which will display whether businesses are seeing more or less turnover in employment; providing better clarity on economic growth and contraction. Bank of England will be utilizing this indicator to gauge inflation and determine interest rates. The UK 10-year Gilt declined two basis points. FTSE 100, +0.77%, STOXX Europe 600 +0.20%, CAC 40 +0.13%, German DAX -0.12%.

EU TRADE SURPLUS WITH U.S. EXPANDS to 11.5 BILLION EUROS, DEFICIT with China grows to 21.4 billion euros. Trade tensions will remain active between China and Europe. Aside from the China deficit, Britons are turning very “cautious” on spending and as Brexit uncertainty lingers, meanwhile near 50-year low unemployment rate, rising wages and weak inflation are helping to offset uncertainty. Potential bidders Apollo Global and Varde Partners for Italian lender Carige are in touch with the ECB of an April 15 deadline to submit possible offers. The bank needs to raise 630 million euros after reporting a loss of 273 million euros in 2018. High-grade bonds edged out high-yield debt as of 3 PM, London time. Among European high-grade bonds showing a concurrence of top price gains at appreciable volumes traded, Shell Intl. Finance BV (USD) 2.125% 5/11/2020 made some analysts’ ‘Conviction Buy’ lists. (See the chart for Shell Intl. Finance Bonds below). Niral Mehta (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.989 1.984 -60.4
Belgium 10 0.535 0.541 -205.9
France 10 0.464 0.473 -213.0
Germany 10 0.086 0.089 -250.8
Italy 10 2.504 2.500 -8.9
Japan 10 -0.035 -0.041 -262.9
Netherlands 10 0.178 0.175 -241.5
Portugal 10 1.307 1.329 -128.7
Spain 10 1.188 1.195 -140.5
Sweden 10 0.319 0.307 -227.5
U.K. 10 1.214 1.225 -137.9
U.S. 10 2.593 2.629

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Dubai 123 bp and Italy 190 bp. Sovereign wideners (5Y): France 28 bp and China 46 bp.

New Issuance

New Issues New Issues [Continued]
1. Cie De St-Gobain (EUR) FLT% 3/22/2021 (03/18/2019): 750MM Senior Unsecured Notes.

2. Deutsche Bank AG (JPY) 1% 3/28/2022 (03/18/2019): 500MM Senior Non Preferred Notes, Price at Issuance 100, Yielding 1%.

ADI Indexes


iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 03/18/2019, 130.37 NAV as of 03/18/2019, 102.92
Daily NAV Change (%) -0.03% Daily NAV Change (%) +0.01%

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 –0.232%, as of 03/15/2019

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