European HY Credit Strategy: HYer for longer

Research evidence excerpt

European HY Credit Strategy: HYer for longer

e world go round

After many years of Euro HY market shrinkage, it’s perhaps time for investors to rejoice: Hikes…can take a hike

the market is expanding again. The 12m Euro HY growth rate has reached an impressive

€45bn. And for the first time since early ’22, HY bond market growth is outstripping loan Credit Investor Survey: All things

market growth, especially for BBs. Many themes have been behind the impressive revival private

in HY bond supply lately, including: the growth in bond tranches of LBO financings, If you like it bubbly…

tighter bank credit conditions, and a jump in HY corporate hybrid issuance. We see more

diversity of Euro HY bond issuers as exactly what’s needed to help coax investor capital Peace out, risk on

back to the market.

CreditBook: Is it all over?

Out with the old, in with the new Deal or no deal?

With so many swirling narratives these days, what macro data really matters for Euro HY

now, and what’s become less relevant for the market over time? We find that European Who let the hawks out?

small cap equity performance is a key indicator of Euro HY outperformance, and small

Audio discussion: Can we keep itcaps are up 12% over the last 6m. Euro HY spreads now track the S&P more closely than

private?they track domestic equities. And China output price PMI – once a very important driver

of Euro HY outperformance – has become much less relevant today. Strait talking

HY fundamentals: steady not stellar Can credit and oil mix?

Charts 21-28 show our early glimpse at the state of Q1 ‘26 HY fundamentals. We see a CreditBook: Damage report

picture of steady, rather than stellar fundamentals. Of note: Italian and French HY credits

are on course for another decline in leverage this quarter.