European Bond Research – May 18, 2020

MARKETS TOOK OFF AS POWELL GAVE BROAD ASSURANCES THAT THE FED WILL DO ANYTHING TO SUPPORT THE ECONOMY. HE STATED THAT IF THE CORONAVIRUS DOES NOT HAVE A SECOND WAVE THAT THE ECONOMY WOULD MOST LIKELY START RECOVERING IN THE SECOND HALF OF 2020. FTSE 100 +4.29%, German DAX +5.67%, CAC 40 +5.16%, STOXX Europe 600 +4.05%.  The 10-year Gilt was up 2.3 bps.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 4.86+ MILLION+ CASES AND 320000+ 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,  Barclays PLC (USD) 5.25% 5/27/2023 made some analysts ‘Conviction buy’ lists. (See the chart for  Barclays PLC bonds below). Pierre Robert

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.12% 0.02% 0.72% -4.98% -3.67% 9.68% Mining -0.30% 0.22% 5.16% -11.35% -9.70% -1.88% Construction -0.81% -1.78% 4.37% -14.66% -11.78% -10.37% Manufacturing -0.39% -0.34% 0.83% -8.07% -5.27% -0.93% Transportion, Communication, Electric/Gas -0.34% -1.18% -0.18% -6.56% -5.24% 3.93% Wholesale 0.77% 0.85% 6.51% -5.48% -4.17% 6.73% Retail 1.22% -3.21% -4.85% -9.44% -3.87% 6.77% Finance, Insurance, Real-Estate -0.02% 0.39% 0.79% -6.99% -4.35% 5.18% Services -0.30% -0.44% 0.07% -9.38% -8.64% 2.63% Energy -0.28% 3.64% 29.67% -30.27% -32.81% -37.00%   Total returns (non-annualized) by rating, market weighted.

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 53.57, Belgium 39.71. Sovereign wideners (5Y):  Italy 231.16  and Greece 272.71.

New Issues

New Issues [Continued]

1. Achmea BV (EUR) 1.5% 5/26/2027 (05/18/2020): 750MM Senior Unsecured Notes. 2. Eastern Power Networks Ltd (GBP) 1.875% 6/1/2035 (05/18/2020): 300MM Senior Unsecured Notes. 3. Bertelsmann SE & Co. KGaA (EUR) 1% 5/25/2027 (05/18/2020): 100MM Senior Unsecured Notes. 4. Volvo Treasury AB (EUR) 1.625% 5/26/2025 (05/18/2020): 500MM Senior Unsecured Notes. 5. Intesa Sanpaolo SPA (EUR) 2.125% 5/26/2025 (05/18/2020): 1250MM Senior Preferred Security. 6. Richemont International (EUR) 1.125% 5/26/2032 (05/18/2020): 850MM Senior Unsecured Notes. 7. Richemont International (EUR) 0.75% 5/26/2028 (05/18/2020): 500MM Senior Unsecured Notes. 8. Richemont International (EUR) 1.625% 5/26/2040 (05/18/2020): 650MM Senior Unsecured Notes. (None Current 05/18/2020)

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 05/18/2020, 128.92 NAV as of 05/18/2020, 92.63 Daily NAV Change (%) +0.45% Daily NAV Change (%) +1.63%

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 –0.131%, as of 05/15/2020.

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