European Bond Research – May 29, 2020

TENSIONS WITH CHINA OVER HONG KONG AND BLAMING THE CORONA VIRUS PANDEMIC ON CHINA, ARE CAUSING MARKETS TO BE DOWN. A NEW COLD WAR BETWEEN THE US AND CHINA ARE CAUSING TENSIONS TO RAPIDLY RISE. FTSE 100 -2.29%, German DAX -1.65%, CAC 40 -1.59%, STOXX Europe 600 -1.6%.  The 10-year Gilt was down 2.7 bps.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 6+ MILLION+ CASES AND 364000+ 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 0.37% 1.09% 6.85% -0.17% -0.68% 11.80% Mining 0.23% 0.19% 12.43% -11.70% -10.90% -1.66% Manufacturing 0.19% 1.03% 2.34% -5.38% -2.83% 1.08% Transportion, Communication, Electric/Gas 0.07% 0.80% 2.59% 0.70% 0.76% 10.54% Wholesale 0.42% 0.87% -1.16% -5.67% -2.92% 7.50% Retail 2.07% 3.23% -5.60% -11.35% -3.64% 7.27% Finance, Insurance, Real-Estate 0.10% 0.84% 3.32% -2.16% -0.27% 9.60% Services 0.24% 2.01% 4.05% -2.60% -3.82% 4.34% Energy 0.41% 3.77% 20.53% -17.46% -27.06% -31.60%   Total returns (non-annualized) by rating, market weighted.

LATEST NEWS: Top moves, sovereign tighteners (5Y): China 52, Belgium 32.65. Sovereign wideners (5Y):  Italy 192.19  and Greece 203.2.

New Issues

New Issues [Continued]

1. Barclays Bank PLC (USD) 0% 6/4/2050 (05/28/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 0%. 2. Hilti AG (CHF) 0.05% 7/2/2025 (05/28/2020): 150MM Senior Unsecured Notes, Price at Issuance 100.187, Yielding .01%. 3. Banque Fed du Credit Mutuel (EUR) 0.75% 6/15/2023 (05/28/2020): 50MM Senior Preferred Security. 4. Credit Agricole SA (EUR) VAR% 6/5/2030 (05/28/2020): 750MM Subordinated Notes, Price at Issuance 99.995, Yielding 1.626%. 5. BASF SE (EUR) 0.101% 6/5/2023 (05/28/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding .101%. 6. Essilorluxottica (EUR) 0.25% 1/5/2024 (05/28/2020): 500MM Senior Unsecured Notes. 7. Essilorluxottica (EUR) 0.5% 6/5/2028 (05/28/2020): 1250MM Senior Unsecured Notes. 8. Yara International ASA (USD) 3.148% 6/4/2030 Reg S (05/28/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.15%. 9. Commerzbank AG (EUR) VAR% 12/5/2030 (05/28/2020): 750MM Subordinated Notes, Price at Issuance 99.527, Yielding 4.086%. 10. BPCE SA (EUR) 0.25% 6/9/2023 (05/29/2020): 50MM Senior Preferred Security.

DATA CHECK:

iShares Core EUR UCITS iShares Euro High Yield UCITS NAV as of 05/29/2020, 130.31 NAV as of 05/29/2020, 95.5 Daily NAV Change (%) +0.05% Daily NAV Change (%) -0.06%

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 –0.142%, as of 05/28/2020.

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