advantage data european summary 12-20-16
TRANSCRIPT
FIXED INCOMERESEARCH
René L. RobertHead of Group
Michael F. BrownHead of Research
Chris M. StehliMarket Analyst
Mark T. McKennaMarket Analyst
Sean W. QuinlanMarket Analyst
David L. ChauMarket Analyst
Minh T. VoQuantitative Analyst
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EUROPEAN BOND RESEARCH December 20, 2016
Bond Markets
Investor confidence was present on Tuesday, as high-yield debt outperformed high-gradecorporate bonds. Monday’s incidents in Turkey and Germany did not disrupt the marketsignificantly, but caused a slight weakening of the Euro. Instead, the U.S. dollar strengthenedas investors pulled money out of gold and into the dollar. European benchmark indicesclosed with net gains throughout the board. The Dow Jones is expected to reach 20,000 onTuesday - a new record . Also, oil prices rose slightly. Major earnings reports are expected onTuesday, including Nike and FedEx.
The markets were in favor of high-yield corporate bonds, which advanced over theirinvestment-grade counterpart, as the major European indices closed the day with net gainsacross the board. The Euronext 100 was Tuesday’s biggest winner, with a +0.67% gain, markinga +2.82% net gain on the year. England’s FTSE 100, France’s CAC 40, and Germany’s DAX closedwith gains of +0.38%, +0.58%, and +0.33%, respectively. Tuesday was a significant day for U.S.equities as well; the Dow Jones Industrial was 0.59% away (as of 12 PM ET) from reaching the 20,000 point milestone - an all time high. Investors seemed to ignore recent politicaltensions, as the recent assassination of Russian ambassador to Turkey Andrey G. Karlov, and theBerlin Christmas market incident did not seem to skew the markets significantly. However, thevalue of the Euro fell roughly -0.09% to the U.S. dollar, possibly due to the events in Ankara andBerlin. As the U.S. dollar strengthened, gold fell. Spot gold was down -0.9%, and gold futuresfell -1.1%. Brent crude oil prices rose $0.31 and West Texas Intermediate futures rose $0.12as of 12 pm ET. Some experts claim that the draw in crude oil stocks could signify the globaloversupply of oil is starting to shrink. Nike and FedEx are both expected to release earningstoday after the U.S. markets close. ADI (Advantage Data Inc.) extensive corporate-bond indexdata showed high-grade bonds edged out high-yield debt in net price gains linked to trades.Among high-yield bonds showing a concurrence of top price gains at appreciable volumes,Allegion PLC (USD) 5.875% 9/15/2023 made some analysts' 'Conviction Buy' lists. (See the chartfor Weatherford Intl. bonds, next page.) Sean Quinlan [email protected]
AdvantageData
Sovereign-Debt Snapshot
European Benchmark Sovereign Bonds
Country Maturity (Years) Yield Previous Spread Under/Over U.S. Treasuries Year AgoFrance 10 0.710 0.772 -183.2 -131.9 Germany 10 0.247 0.317 -229.5 -166.0 Italy 10 1.833 1.886 -71.0 -64.4 Netherlands 10 0.397 0.457 -214.5 -150.6 Spain 10 1.378 1.451 -116.5 -52.3 U.K. 10 1.256 1.294 -128.6 -37.6 U.S. 10 2.542 2.591 ...
Credit-Default Swap Market
LATEST NEWS: Top moves, daily sovereign tighteners (5Y): Sweden 22 bp and Czech Republic 42bp. Daily sovereign wideners (5Y): Spain 83 bp and France 40 bp.
New Issuance
New Issues New Issues [Continued]
1. Greenland Global Investment (USD) 4.375% 12/22/2019(12/19/2016): 180MM Senior Unsecured Notes, Price at Issuance98.552, Yielding 4.9%.
2. Landshypotek Bank AB (SEK) 0.065% 1/15/2019 (12/19/2016):300MM Senior Unsecured Notes.
3. Cifi Hldg Group (USD) 5.5% 1/23/2022 (12/19/2016): 285MMSenior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.
4. Royal Bank of Canada (USD) 3.84% 12/29/2036 (12/19/2016):50MM Senior Unsecured Notes, Price at Issuance 100, Yielding3.84%.
5. Toyota Motor Finance (Netherlands) BV (GBP) FLT% 1/17/2018(12/19/2016): 150MM Senior Unsecured Notes, Price at Issuance100.
6. Telefonica Emisiones SAU (EUR) 4% 12/28/2051 (12/20/2016):150MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.
ADI Indexes
DATA CHECK: iShares Barclays Capital iShares Euro High Yield UCITSNAV as of 12/20/2016, 129.74 NAV as of 12/20/2016, 106.25Daily NAV Change (%) +0.04% Daily NAV Change (%) - 0.23%
OVERALL EUROPEAN CREDIT MARKET:
The euro-zone economy shows some signs of improvement although beset by abnormally highunemployment in periphery nations, slow growth and a lack of consensus among leading officials as to howto resolve the region's long-standing debt crisis. Closely watched indicators and rates:
Eurostat's unemployment rate: currently 10.0% (September 2016)Eurostat's quarterly GDP: 0.6%, Q1 (Final Estimate)6-month Euribor: current value -0.216%, as of 12/20/2016ECB main refinancing operations rate: 0.05%
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