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European Bond Research – May 19, 2020

Posted on May 19, 2020
EUROPEAN BOND RESEARCH
May 19, 2020
Bond Markets

MARKETS TOOK A BREATHER AFTER A HUGE JUMP YESTERDAY. MARKETS ARE IN “WAIT AND SEE” MODE AS THEY BALANCE FED REASSURANCE, POSITIVE VACCINE/TREATMENT NEWS, AND TERRIBLE ECONOMIC NEWS AND EARNINGS. THURSDAY’S EMPLOYMENT NEWS MAY BE KEY FOR SENTIMENT. FTSE 100 -0.77%, German DAX +0.15%, CAC 40 -0.89%, STOXX Europe 600 -0.61%.  The 10-year Gilt was up 1 bps.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 5+ MILLION+ CASES AND 323000+ 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 0.05% -0.10% 1.61% -4.78% -3.37% 9.43%
Mining 0.18% 2.57% 5.26% -11.26% -9.51% -1.86%
Construction 0.03% -0.39% 0.04% -14.51% -11.49% -9.54%
Manufacturing 0.05% -0.17% 0.54% -8.04% -5.39% -0.78%
Transportion, Communication, Electric/Gas 0.19% -0.05% 0.25% -2.59% -1.30% 8.90%
Wholesale -0.46% 0.60% 5.53% -5.73% -4.53% 6.28%
Retail -0.57% -5.03% -6.25% -9.98% -4.26% 6.58%
Finance, Insurance, Real-Estate 0.10% 0.17% 0.97% -6.78% -4.07% 5.26%
Services 0.59% 0.23% -1.28% -8.97% -8.15% 2.65%
Energy 0.53% 2.52% 30.62% -29.67% -32.45% -36.79%
 
Total returns (non-annualized) by rating, market weighted.
Credit-Default Swap Market

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 51.36, Belgium 39.63. Sovereign wideners (5Y):  Italy 225.12  and Greece 269.64.

New Issuance

New Issues New Issues [Continued]
1. Achmea BV (EUR) 1.5% 5/26/2027 (05/18/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.297, Yielding 1.607%.

2. Eastern Power Networks Ltd (GBP) 1.875% 6/1/2035 (05/18/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.651, Yielding 1.902%.

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, Price at Issuance 99.691, Yielding 1.69%.

5. Intesa Sanpaolo SPA (EUR) 2.125% 5/26/2025 (05/18/2020): 1250MM Senior Preferred Security, Price at Issuance 99.803, Yielding 2.167%.

6. Richemont International (EUR) 1.125% 5/26/2032 (05/18/2020): 850MM Senior Unsecured Notes, Price at Issuance 99.732, Yielding 1.149%.

7. Richemont International (EUR) 0.75% 5/26/2028 (05/18/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.884, Yielding .765%.

8. Richemont International (EUR) 1.625% 5/26/2040 (05/18/2020): 650MM Senior Unsecured Notes, Price at Issuance 98.387, Yielding 1.721%.

9. LCPR Senior Secured Financing Designated Activity Company (USD) 6.75% 10/15/2027 144A (05/18/2020): 1215MM First Lien Notes, Price at Issuance 100, Yielding 6.75%.

10. LCPR Senior Secured Financing Designated Activity Company (USD) 6.75% 10/15/2027 (05/18/2020): 70MM First Lien Notes, Price at Issuance 100, Yielding 6.75%.

ADI Indexes

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS
NAV as of 05/19/2020, 128.56 NAV as of 05/19/2020, 92.55
Daily NAV Change (%) -0.28% 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 rateEXPECTED TO SOAR.
  • Eurostat’s quarterly GDP: EXPECTED TO CONTRACT.
  • 6-month Euribor: current value –0.137%, as of 05/19/2020.

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