The document provides an overview and analysis of the European bond markets on December 20, 2016. Key points include: - Investor confidence was present as high-yield debt outperformed investment-grade corporate bonds and European indices closed with gains. - Political tensions in Turkey and Germany did not significantly impact markets but caused a slight weakening of the Euro against the dollar. - The Dow Jones Industrial Average was close to reaching 20,000, a new record high, while oil prices rose slightly and gold fell.

1. FIXED INCOME
RESEARCH
René L. Robert
Head of Group
Michael F. Brown
Head of Research
Chris M. Stehli
Market Analyst
Mark T. McKenna
Market Analyst
Sean W. Quinlan
Market Analyst
David L. Chau
Market Analyst
Minh T. Vo
Quantitative Analyst
BOSTON
One Federal Street
Floor 25
Boston, MA 02110
TEL: 617.261.9700
FAX: 617.261.9696
NEW YORK
244 Madison Avenue
Suite 233
New York, NY 10016
TEL: 212.227.8870
FAX: 212.208.3059
LONDON
155 Minories, Suite 140
London EC3N 1AD UK
TEL: +44 (0) 207.096.0983
FAX: +44 (0) 871.251.0863
EUROPEAN BOND RESEARCH December 20, 2016
Bond Markets
Investor confidence was present on Tuesday, as high-yield debt outperformed high-grade
corporate bonds. Monday’s incidents in Turkey and Germany did not disrupt the market
significantly, but caused a slight weakening of the Euro. Instead, the U.S. dollar strengthened
as investors pulled money out of gold and into the dollar. European benchmark indices
closed with net gains throughout the board. The Dow Jones is expected to reach 20,000 on
Tuesday - a new record. Also, oil prices rose slightly. Major earnings reports are expected on
Tuesday, including Nike and FedEx.
The markets were in favor of high-yield corporate bonds, which advanced over their
investment-grade counterpart, as the major European indices closed the day with net gains
across the board. The Euronext 100 was Tuesday’s biggest winner, with a +0.67% gain, marking
a +2.82% net gain on the year. England’s FTSE 100, France’s CAC 40, and Germany’s DAX closed
with 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 political
tensions, as the recent assassination of Russian ambassador to Turkey Andrey G. Karlov, and the
Berlin Christmas market incident did not seem to skew the markets significantly. However, the
value of the Euro fell roughly -0.09% to the U.S. dollar, possibly due to the events in Ankara and
Berlin. As the U.S. dollar strengthened, gold fell. Spot gold was down -0.9%, and gold futures
fell -1.1%. Brent crude oil prices rose $0.31 and West Texas Intermediate futures rose $0.12
as of 12 pm ET. Some experts claim that the draw in crude oil stocks could signify the global
oversupply of oil is starting to shrink. Nike and FedEx are both expected to release earnings
today after the U.S. markets close. ADI (Advantage Data Inc.) extensive corporate-bond index
data 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 chart
for Weatherford Intl. bonds, next page.) Sean Quinlan squinlan@advantagedata.com
AdvantageData

2. Sovereign-Debt Snapshot
European Benchmark Sovereign Bonds
Country Maturity (Years) Yield Previous Spread Under/Over U.S. Treasuries Year Ago
France 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 42
bp. 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 Issuance
98.552, 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): 285MM
Senior 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, Yielding
3.84%.
5. Toyota Motor Finance (Netherlands) BV (GBP) FLT% 1/17/2018
(12/19/2016): 150MM Senior Unsecured Notes, Price at Issuance
100.
6. Telefonica Emisiones SAU (EUR) 4% 12/28/2051 (12/20/2016):
150MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

3. ADI Indexes
DATA CHECK:
iShares Barclays Capital iShares Euro High Yield UCITS
NAV as of 12/20/2016, 129.74 NAV as of 12/20/2016, 106.25
Daily 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 high
unemployment in periphery nations, slow growth and a lack of consensus among leading officials as to how
to 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 12/20/2016
ECB main refinancing operations rate: 0.05%
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