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🌍 Absolute yields in the global credit market present compelling long-term entry points, especially for high-quality European corporate bonds. Compared to the US market, the attractiveness of EUR Investment Grade (IG) credit is soaring. While concerns about a deeper recession in Europe have caused some turbulence, they have also opened up intriguing investment opportunities. Moreover, the recent Credit Suisse incident has further contributed to the dynamic landscape. 📊🔍 Is it time to seize the potential yield offered by EUR IG bonds? 💡💰 Source : Bloomberg

The iTraxx Main index, which monitors the 5-year credit default swaps (CDS) of IG corporate bonds, achieved a significant breakthrough by crossing the 80 bps threshold for the first time since the banking stress experienced in March. This development indicates a positive shift in market sentiment and improved confidence in the IG corporate sector. This achievement in the credit market raises an important question: Is the market too complacent with the current situation, or does it suggest that a soft landing has become the baseline scenario? Source: Bloomberg

🌍 European investment grade corporate bonds offer some of the most attractive yields in a decade. 📉 Multiple factors contribute to this level, including the European Central Bank's sudden monetary policy tightening and widening credit spreads resulting from concerns over a deeper recession in Europe and higher default rates. 💼 The recent Credit Suisse event has further increased the European premium, creating compelling opportunities. 📈 Currently, the EUR swap curve (the reference curve for corporate refinancing in EUR) is historically high compared to the German yield curve, due to factors such as the supply shortage and the flight to quality. ❓ Despite the risk of recession in Europe, should we take advantage of the attractive long-term entry points of the European high quality credit segment?

The rising cost of financing could be a headwind for companies, but investment grade (IG) companies appear to be "immune" for the next few years. Indeed, according to Bank of America, refinancing maturing debt at the current IG yield of 5.4% would reduce the coverage ratio to about 11.5x by the year 2026, which is still above the median. Source: Bank of America.

U.S. investment grade (IG) bonds recorded their best January performance (+4%) since 1975! After having its worst year in 2022 (-15.8%), the IG bond market is recovering thanks to the slowing of the Federal Reserve's monetary policy tightening and a better than expected economic outlook. Source: Bloomberg