European Bond Research – May 12, 2020

MARKETS DOWN AGAIN AS BOEING PREDICTS AT LEAST ONE AIRLINE BANKRUPTCY. THE “IRRATIONAL EXUBERANCE” IN THE MARKET MAYBE FINALLY HITTING THE ECONOMIC REALITY OF MAINSTREET.  FTSE 100 +0.93%, German DAX -0.05%, CAC 40 -0.39%, STOXX Europe 600 +0.28%.  The 10-year Gilt was down 2.9 bps.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 4.3+ MILLION+ CASES AND 290000+ 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 highyield 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,  Mylan Inc. (USD) 3.75% 12/15/2020 made some analysts ‘Conviction buy’ lists. (See the chart for  Mylan Inc. bonds below). Pierre Robert

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.34% 1.67% 7.19% -4.57% -3.33% 8.27% Mining 0.61% 0.64% 2.54% -15.59% -14.11% -7.65% Construction -1.10% 1.99% 10.62% -13.47% -11.03% -9.23% Manufacturing 0.02% 0.52% 3.85% -7.04% -4.73% -0.29% Transportion, Communication, Electric/Gas -0.03% 1.71% 0.57% -7.36% -6.02% 2.05% Wholesale -0.12% -0.03% 5.13% -6.31% -5.04% 5.77% Retail 1.56% -0.62% 1.60% -5.77% -0.19% 11.12% Finance, Insurance, Real-Estate 0.18% 0.71% 2.99% -7.73% -5.14% 4.43% Services -0.15% 0.08% 5.55% -9.05% -8.34% 2.92% Energy 1.63% -1.22% 22.75% -33.43% -34.02% -38.34%   Total returns (non-annualized) by rating, market weighted.

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 49.2, Belgium 38.25. Sovereign wideners (5Y):  Italy 233.35  and Greece 273.8.

New Issues

New Issues [Continued]

1. Credit Suisse (EUR) 0.45% 5/19/2025 (05/11/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.778, Yielding .495%. 2. Barclays Bank PLC (USD) FLT% 11/11/2020 (05/11/2020): 300MM Senior Unsecured Notes, Price at Issuance 100. 3. Bertelsmann SE & Co. KGaA (EUR) 1.5% 5/15/2030 (05/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.329, Yielding 1.573%. 4. Skandinaviska Enskilda Banken AB (EUR) 0.25% 5/19/2023 (05/11/2020): 1000MM Senior Preferred Security, Price at Issuance 99.702, Yielding .35%. 5. Total Capital SA (EUR) 1.618% 5/18/2040 (05/11/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.618%. 6. Evonik Industries AG (EUR) 0.625% 9/18/2025 (05/11/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.599, Yielding .702%. 7. Credit Suisse (EUR) FLT% 5/18/2022 (05/11/2020): 1500MM Senior Unsecured Notes, Price at Issuance 100. 8. Eni SpA (EUR) 1.25% 5/18/2026 (05/11/2020): 1000MM Senior Unsecured Notes. 9. Eni SpA (EUR) 2% 5/18/2031 (05/11/2020): 1000MM Senior Unsecured Notes. 10. Wuerth Finance International BV (EUR) 0.75% 11/22/2027 (05/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.768, Yielding .782%.

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 05/12/2020, 128.82 NAV as of 05/12/2020, 92.65 Daily NAV Change (%) -0.18% Daily NAV Change (%) +0.19%

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 –0.147%, as of 05/11/2020.

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