European Credit Weekly: Updating the trade portfolio

Research evidence excerpt

European Credit Weekly: Updating the trade portfolio

J P M O R G A N Europe Credit Research

19 June 2026

European Credit Weekly

Updating the trade portfolio

• This week we published European Credit Strategy 2026 Mid-Year Europe Corporate Credit - Strategy

AC Outlook: There Will Be Oil and European Credit 2026 Mid-Year Outlook Matthew Bailey

(Presentation). (44-20) 7134-2384

• We add two trades to our portfolio: i) OW Industrials versus UW matthew.a.bailey@jpmorgan.comAC

Consumer; and ii) OW Corporate Hybrids versus Bank T2. We also Daniel Lamy

(44-20) 7134-0467

refresh our single-B picks. daniel.lamy@jpmorgan.com

J.P. Morgan Securities plc

Euro credit traded essentially unchanged this week, with investment grade flat and

high yield 2bp tighter. This was arguably surprising given that this week saw the

agreement and signature of a US-Iran MoU, which, in theory, should reopen the

Strait of Hormuz and lift the US blockade on Iran. Further, up until last night, the

agreement seemed to be taking effect, with three Saudi Arabian VLCCs with 6m

barrels of oil visibly transiting the Strait yesterday for the first time since the start

of the war. The lack of reaction strengthens our conviction that spreads have

reached a floor, although we would flag that total returns were more impressive at

+0.49% for investment grade and +0.39% in high yield due to falling rates.

The natural corollary of spreads at the floor is that the risks remain to the downside.

In our baseline scenario, in which the US-Iran deal holds, we see investment grade

continuing to trade flat through the end of the year at 90bp. However, if the deal

fails and the Strait of Hormuz remains closed throughout the summer, we continue

to see investment grade widening to 160bp. In general, we have maintained