Corporate Hybrids: Valuations leave little margin for error

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Corporate Hybrids: Valuations leave little margin for error

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Corporate Hybrids

Valuations leave little margin for error

Rating Change - Credit

Good run, but time for a breather… 08 June 2026

Despite market jitters, beta has performed well across BBs and the IG hybrid space. At Credit

current levels, we find it difficult to justify another round of beta compression. Given still Europe

unresolved geopolitical headwinds, valuations look stretched. In Exhibit 10, we present Non-Financials

the full list of sub bonds that offer best-in-class yield and spread pick-up vs. seniors. Credit Research

Stephanie Vincent, CFA

Real estate: Hybrid headwinds Research Analyst

MLI (UK)

We envisage that European real estate credits could face rate and fundamental headwinds +44 20 7996 1143

from potential inflation with backloaded impact timing. We believe credit investors could stephanie.a.vincent@bofa.com

be exposed to asymmetric downside from current tight levels. We are therefore UW Prithvi Vetsa

Research Analyst

Unibail €30 -31 perps, UW CPI €26 -31s perps, UW Aroundtown €26 -31s perps. We MLI (UK)

drop coverage of the following instruments given limited notional outstanding: the CPIPGR prithvi.vetsa@bofa.com

7.217% Perp EUR '26 and the IIAAV 2.500% Perp EUR '27. Mark Xu, CFA

BofASE (France)

Energy: OW certain Repsol Hybrids, UW BP €NC ’31s mark.xu2@bofa.com

We add coverage on REPSM 4.5% €NC’31s and 4.197% €NC’31s at Overweight, William Dennis

reflecting the attractive spread and significant boost to credit profile from high energy ResearchMLI (UK) Analyst

prices and refining margins. We change our recommendation on BPLN €’NC31s to UW william.dennis@bofa.com

from MW, reflecting tight valuations. Conor Forde