Germany France Italy Agencies Spain Netherlands Belgium Austria Portugal Finland Ireland Slovakia Slovenia Lux Latvia Lithuania Malta 7.8 2.6 2.1 3.21 1.17 Trend Macrolytics, LLC Donald Luskin, Chief Investment Officer Thomas Demas, Managing Director Michael Warren, Energy Strategist Data Insights: Euro Area Recovery Monitor Wednesday, April 1, 219 Euro-QE at the end of the road for now ( billions) 2,5 2, Private sector 177.7 1,5 1, 5 Securities Markets Programme 62.84 Covered bonds 1 3.92 Covered bonds 2 3.83 Asset Backed Securities 25.65 Covered bonds 3 261.84 Public sector 2,99.12 29 21 211 212 213 214 215 216 217 218 219 511 423 37 Total Public Sector Purchase Program 2,99.12 Weighted average maturity 7.28 years 23 259 113 73 58 38 34 31 12 Source: ECB, TrendMacro calculations Copyright 219 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% -- Apr 18 Jul 18 Oct 18 Jan 19 Apr 19.5% 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
-12.8% -2.8% -4.6% -4.7% -.3% -.6% -2.7% +.7% +6.4% +4.2% +1.1% +9.% +8.8% +6.4% +5.4% +15.3% Sovereign stress monitor: 1-year bond spreads High Low Last 2 to present Trailing 12m Germany Spread to US High.74% Dec '8 High -2.27% Apr 9 Last -2.51% Low -2.76% Oct '18 Low -2.79% Nov 6 France Spread to Germany High 1.32% Dec '11 High.51% Jan 8 Last.35% Low -.1% Jan '5 Low.21% Apr 23 Italy Spread to Germany High 5.28% Dec '11 High 3.27% Oct 18 Last 2.43% Low.9% Nov '4 Low 1.14% Apr 24 Spain Spread to Germany High 5.52% Aug '12 High 1.36% May 29 Last 1.9% Low -.5% Nov '4 Low.67% Apr 24 Greece Spread to Germany High 33.13% Dec '11 High 4.54% May 29 Last 3.47% Low.9% Jan '5 Low 3.31% Apr 3 Portugal Spread to Germany High 14.61% Jan '12 High 1.93% May 29 Last 1.21% Low -.54% Jun '6 Low 1.5% Apr 24 Ireland Spread to Germany High 8.67% Jun '11 High.79% Feb 8 Last.57% Low -.67% Jun '7 Low.39% Apr 23 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 +2.3% 7.8% 16.1% Germany +2.% 3.1% 5.6% France +2.5% 8.8% 2.1% Italy +2.2% 1.7% 32.8% Spain +1.1% 13.9% 32.4% Greece 18.% 39.5% Portugal +1.3% 6.3% 16.4% Ireland +3.% 5.4% 13.4% Source: Eurostat, TrendMacro calculations 5
29 21 211 212 213 214 215 216 217 218 219 Purchasing Manager Indices Manufacturing Last Prev 13-month history Services Last Prev 13-month history Eurozone Mar 47.5 49.3 Eurozone Mar 53.3 52.8 UK Mar 55.1 52.1 UK Mar 48.9 51.3 Germany Mar 44.1 47.6 Germany Mar 55.4 55.3 France Mar 49.7 51.5 France Mar 49.1 5.2 Italy Mar 47.4 47.7 Italy Mar 52.6 53.1 Spain Mar 5.9 49.9 Spain Mar 56.8 54.5 Ireland Mar 53.9 54. Ireland Mar 55.3 55.9 Netherlands Mar 52.5 52.7 Austria Mar 5. 51.8 Greece Mar 54.7 54.2 Czech Rep Mar 47.3 48.6 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 21 211 212 213 214 215 216 217 218 219 6
+.3% Europe +1.4% +.8% +1.% Germany +1.4% +1.% France +1.3% Italy +1.1% +.3% Spain +1.3% +.7% Greece +.8% +.6% Portugal +.8% +1.% Ireland +.7% +.7% 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 21 211 212 213 214 215 216 217 218 219 Source: Eurostat, 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