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European Bond Research – March 19, 2019

Posted on March 19, 2019
RISK-ON SENTIMENT REGAINED CONTROL as investors pour capital into equities. The pound rallied to $1.3282, “The predominant notion adopted by the market is that as long as the worst case scenario of hard Brexit is avoided by delaying Brexit, the pound is a buy on dips,” stated by Rabobank strategists. Advisers to the German government on Tuesday cut its growth forecast for this year to 0.8 percent. Christopher Schmidt, one of the advisers mentioned: “German economic boom is over but a recession is not currently expected due to the robust domestic economy.” The ZEW indicator of economic sentiment points to relatively weak growth for the first half of 2019 fueled by industrial orders posting their largest drop in seven months. The UK 10-year Gilt elevated two basis points. FTSE 100, +0.48%, STOXX Europe 600 +0.60%, CAC 40 +0.27%, German DAX +1.10%.

EU EXPECTS SWIFT INFORMATION FROM BRITAIN regarding next steps in Brexit while we are exactly 10 days from the United Kingdom’s withdrawal for the European Union. Andrew Bridgen from the UK parliament mentioned, “Prime Minster May has got to go, we are going to have a new prime minister and I can’t see us getting out of this issue without a general election,”. May has strongly disapproved a new election. 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, Barclays Bank PLC (USD) 5% 6/28/2024 made some analysts’ ‘Conviction Buy’ lists. (See the chart for Barclays Bank PLC Bonds below). Niral Mehta (

Sovereign-Debt Snapshot

Country Maturity (Y) Yield (%) Previous (%) Spread (bp)
Australia 10 1.993 1.989 -61.0
Belgium 10 0.521 0.535 -208.2
France 10 0.453 0.464 -214.9
Germany 10 0.087 0.086 -251.5
Italy 10 2.425 2.504 -17.7
Japan 10 -0.036 -0.035 -263.9
Netherlands 10 0.171 0.178 -243.2
Portugal 10 1.258 1.307 -134.4
Spain 10 1.151 1.188 -145.2
Sweden 10 0.327 0.319 -227.6
U.K. 10 1.198 1.214 -140.4
U.S. 10 2.602 2.592

Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): Dubai 123 bp and Portugal 66 bp. Sovereign wideners (5Y): France 27 bp and Belgium 23 bp.

New Issuance

New Issues New Issues [Continued]
1. GlaxoSmithKline Capital PLC (USD) 3% 6/1/2024 (03/18/2019):1000MM Senior Unsecured Notes, Price at Issuance 99.476, Yielding 3.11%.

2. Erste Group Bank AG (EUR) 1.54% 3/18/2034 (03/18/2019): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.54%.

3. Bankia SA (EUR) 0.875% 3/25/2024 (03/18/2019): 500MM Senior Preferred Security.

ADI Indexes


iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 03/19/2019, 130.51 NAV as of 03/19/2019, 103.15
Daily NAV Change (%) +0.00% Daily NAV Change (%) +0.13%

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 –0.231%, as of 03/18/2019

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