Five Ideas for Choppier Waters: European Credit Strategy | Europe

Research evidence excerpt

Five Ideas for Choppier Waters: European Credit Strategy | Europe

Idea

July 24, 2026 03:50 PM GMT

Morgan Stanley & Co. International plc+MEuropean Credit Strategy | Europe Aron Becker

Strategist

Five Ideas for Choppier Waters Aron.Becker@morganstanley.comEllie Dann +44 20 7677-0754

Ellie.Dann@morganstanley.com +44 20 7425-2599

Geopolitical uncertainty has reemerged, commodity prices are at Jonathan Loke

a two-month high, hyperscaler capex and supply concerns are StrategistJonathan.Loke1@morganstanley.com +44 20 7677-3136

starting to weigh on the issuers, yet index spreads remain well Morgan Stanley India Company Private Limited+

anchored. We highlight five tactical opportunities in European Yagyesh Modi

credit. Yagyesh.Modi@morganstanley.com +91 22 6995-2808

Key Takeaways

We recommend long CDX HY vs. iTraxx XO via junior tranches; we see room for

further XO-Main decompression.

We remain cautious on Autos credit, as we see the recent widening not fully

reflecting the fundamental challenges ahead.

We prefer EU IG > US IG in cash, given the worse supply technicals in the latter.

We screen for EUR bonds trading cheapest to USD.

We expect M&A momentum to gather further pace. We provide top-down

screens of potential candidates and related bonds with change-of-control

provisions.

We reiterate our recommendation to buy protection on French bank CDS vs

iTraxx Senior Financials.

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