Germany France Italy Agencies Spain Netherlands Belgium Austria Portugal Finland Ireland Slovakia Slovenia Lux Latvia Lithuania Malta 7.6 2.5 1.9 2.86 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, July 26, 218 The ECB's drive to build purchased assets ( billions) 2,5 2, Private sector 164.39 1,5 1, 5 Securities Markets Programme 81.63 Covered bonds 1 4.49 Public sector 2,29.92 Covered bonds 2 4.9 Asset Backed Securities 27.98 Covered bonds 3 256.11 29 21 211 212 213 214 215 216 217 218 492 41 Total Public Sector Purchase Program 2,29.92 Weighted average maturity 7.59 years 349 221 248 11 7 55 34 32 28 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% -- Jul 17 Oct 17 Jan 18 Apr 18 Jul 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
-1.5% -1.2% -.9% -.7% 5.9% 6.2% 5.9% 6.1% 7.7% 8.% 5.7% 5.9% 21.3% 21.6% 2.1% 2.4% Sovereign stress monitor: 1-year bond spreads High Low Last 2 to present Trailing 12m Germany Spread to US High.74% Dec '8 High -1.72% Sep 5 Last -2.58% Low -2.58% Jul '18 Low -2.59% May 28 France Spread to Germany High 1.32% Dec '11 High.42% Oct 11 Last.3% Low -.1% Jan '5 Low.21% Apr 23 Italy Spread to Germany High 5.28% Dec '11 High 2.9% May 29 Last 2.28% Low.9% Nov '4 Low 1.14% Apr 24 Spain Spread to Germany High 5.52% Aug '12 High 1.36% May 29 Last.95% Low -.5% Nov '4 Low.67% Apr 4 Greece Spread to Germany High 33.13% Dec '11 High 5.31% Sep 27 Last 3.42% Low.9% Jan '5 Low 2.91% Feb 2 Portugal Spread to Germany High 14.61% Jan '12 High 2.51% Aug 29 Last 1.34% Low -.54% Jun '6 Low 1.5% Apr 24 Ireland Spread to Germany High 8.67% Jun '11 High.71% May 29 Last.47% 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.% 8.4% 16.8% Germany +2.3% 3.4% 6.1% France +1.8% 9.2% 2.4% Italy +.4% 1.7% 31.9% Spain +1.4% 15.8% 33.8% Greece 2.2% 42.3% Portugal -1.5% 7.3% 2.8% Ireland +2.7% 5.1% 11.4% Source: Eurostat, TrendMacro calculations 5
Purchasing Manager Indices Manufacturing Last Prev 13-month history Services Last Prev 13-month history Eurozone Jul 55.1 54.9 Eurozone Jul 54.4 55.2 UK Jun 54.4 54.3 UK Jun 55.1 54. Germany Jul 57.3 55.9 Germany Jul 54.4 54.5 France Jul 53.1 52.5 France Jul 55.3 55.9 Italy Jun 53.3 52.7 Italy Jun 56.3 55.1 Spain Jun 53.4 53.4 Spain Jun 55.4 56.4 Ireland Jun 56.6 55.4 Ireland Jun 59.5 59.3 Netherlands Jun 6.1 6.3 Austria Jun 56.6 57.3 Greece Jun 53.5 54.2 Czech Rep Jun 56.8 56.5 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.% +.9% +1.3% Germany +2.1% +1.1% +.8% France +2.3% Italy +1.4% +.7% +1.% Spain +2.3% Greece +1.% +.2% Portugal +2.% +1.5% Ireland +.7% +.1% 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 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 21 7