Five Ideas for Choppier Waters: European Credit Strategy | Europe

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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.

Voting in the Extel Global Fixed Income Survey is closing today! If you have enjoyed

our research over the past year, we'd appreciate your support! We are competing in

the following categories:

Developed Europe: Economics & Strategy → Investment-Grade Strategy

Developed Europe: Economics & Strategy → High-Yield Strategy

Developed Europe: Economics & Strategy → Credit Derivatives

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