Germany France Italy Agencies Spain Netherlands Belgium Austria Portugal Finland Ireland Slovakia Slovenia Lux Latvia Lithuania Malta 7.8 2.6 2. 3.1 1.11 Trend Macrolytics, LLC Donald Luskin, Chief Investment Officer Thomas Demas, Managing Director Michael Warren, Energy Strategist Data Insights: Euro Area Recovery Monitor Thursday, October 25, 218 The ECB's drive to build purchased assets ( billions) 2,5 2, Private sector 172.66 1,5 1, 5 Securities Markets Programme 72.98 Covered bonds 1 4.48 Public sector 2,83.89 Covered bonds 2 4.3 Asset Backed Securities 27.26 Covered bonds 3 26.92 29 21 211 212 213 214 215 216 217 218 51 414 Total Public Sector Purchase Program 2,83.89 Weighted average maturity 7.47 years 36 228 257 114 72 57 36 32 3 12 Source: ECB, TrendMacro calculations Copyright 218 Trend Macrolytics LLC. All rights reserved. This document is not to be forwarded to individuals or organizations not authorized by Trend Macrolytics LLC to receive it. For information purposes only; not to be deemed to be recommendations for buying or selling specific securities or to constitute personalized investment advice. Derived from sources deemed to be reliable, but no warranty is made as to accuracy.
Banking system dependency: borrowing from the ECB ( billions) Total LTRO Spain Italy Portugal Ireland Greece France Germany Other 1,2 1, 8 6 4 2 Source: ECB, National central banks, TrendMacro calculations Bank stability: 9-day LIBOR/OIS spreads USD EUR 2.5% 2.% 1.5% 1.%.6%.5%.4%.3%.2%.1% -- Oct 17 Jan 18 Apr 18 Jul 18 Oct 18.5% 2
The credit drought: loans to non-financial businesses (YOY growth) Loans to 1 year Loans 1-5 years Loans 5 years plus Total 25% 15% 5% -5% -15% Source: ECB, TrendMacro calculations Supply and demand for lending: ECB Bank Survey Net number of banks reporting for: Enterprises Home mortgage Consumer 8 6 4 2 Loan standards tightening -2 6 4 2-2 -4-6 Loan demand increasing -8 6 4 2-2 -4-6 Expected loan demand increasing -8 Source: ECB, TrendMacro calculations 3
-1.1% -12.2% -.9% -2.8% -5.1% 4.7% 2.2% 3.6% 1.1% 3.8% 1.3% 1.6% 14.5% 11.7% 1.9% 8.2% Sovereign stress monitor: 1-year bond spreads High Low Last 2 to present Trailing 12m Germany Spread to US High.74% Dec '8 High -1.94% Oct 24 Last -2.73% Low -2.73% Oct '18 Low -2.76% Oct 18 France Spread to Germany High 1.32% Dec '11 High.41% Jun 11 Last.38% Low -.1% Jan '5 Low.21% Apr 23 Italy Spread to Germany High 5.28% Dec '11 High 3.27% Oct 18 Last 3.21% Low.9% Nov '4 Low 1.14% Apr 24 Spain Spread to Germany High 5.52% Aug '12 High 1.36% May 29 Last 1.23% Low -.5% Nov '4 Low.67% Apr 4 Greece Spread to Germany High 33.13% Dec '11 High 5.19% Oct 3 Last 3.9% Low.9% Jan '5 Low 2.91% Feb 2 Portugal Spread to Germany High 14.61% Jan '12 High 1.93% May 29 Last 1.58% Low -.54% Jun '6 Low 1.5% Apr 24 Ireland Spread to Germany High 8.67% Jun '11 High.71% May 29 Last.57% Low -.67% Jun '7 Low.18% Dec 5 1-year sovereign bond total returns, trailing 12-months EUR USD Germany France Italy Spain Greece Portugal Ireland US 4
Labor market in intensive care ULC: Nominal, quarterly YOY UE: High : monthly improvement or worsening in rate of change 2 to present Unit labor costs Unemployment Youth unemployment Euro Area +2.2% 8.1% 16.6% Germany +2.% 3.4% 6.2% France +2.4% 9.3% 2.2% Italy +3.6% 9.7% 31.% Spain +.7% 15.2% 33.6% Greece 19.% 37.9% Portugal +1.4% 6.8% 19.5% Ireland +2.5% 5.4% 12.9% Source: Eurostat, TrendMacro calculations 5
Purchasing Manager Indices Manufacturing Last Prev 13-month history Services Last Prev 13-month history Eurozone Oct 52.1 53.2 Eurozone Oct 53.3 54.7 UK Sep 53.8 53. UK Sep 53.9 54.3 Germany Oct 52.3 53.7 Germany Oct 53.6 55.9 France Oct 51.2 52.5 France Oct 55.6 54.8 Italy Sep 5. 5.1 Italy Sep 52.1 54.7 Spain Sep 51.4 53. Spain Sep 52.5 52.7 Ireland Sep 56.3 57.5 Ireland Sep 58.7 58. Netherlands Sep 59.8 59.1 Austria Sep 55. 56.4 Greece Sep 53.6 53.9 Czech Rep Sep 53.4 54.9 Source: Markit, TrendMacro calculations Regional currency flight Euro vs Swiss franc Swiss National Bank floor SNB FX reserves 1.8 1.6 1.4 8 6 4 2 1.2 1.8 29 21 211 212 213 214 215 216 217 218 6
Europe +2.1% +.9% +1.3% Germany +2.2% +1.2% +.8% Italy +1.5% +.5% +.9% France +2.5% Spain +2.3% Greece +1.1% +.5% Portugal +1.8% +1.5% Ireland +1.2% +.4% Euro area consumer inflation, year on year Country: Headline Ex-food and energy Ex-energy Euro area: Headline Energy Ex-energy 2% 15% 1% 5% -- -5% -1% -15% 28 29 21 211 212 213 214 215 216 217 218 Source: Eurosat, TrendMacro calculations Draghi's dashboard: swap-implied inflation expectations since Whatever it takes 5-year inflation-swap rate, 5 years forward +2.5% +2.3% +2.1% +1.9% +1.7% +1.5% +1.3% +1.1% Jul 212 Jul 213 Jul 214 Jul 215 Jul 216 Jul 217 Jul 218 7