Easy does it for credit as rate volatility subsides

Paris, 09/08/2017



Greg Venizelos, 

Senior Strategist (Interest rates, Govies, Linkers)

Credit market monthly review – July 2017


Key points

  • The outperformance by EUR credit is not letting up, taking EUR spreads to new post Global Financial Crisis lows.
  • Spreads are becoming increasingly immune to rate tantrums. This bodes well in light of the possibility of European Central Bank quantitative easing taper risk.
  • Global investment grade total returns have recouped the pre Sintra watermark and 2017 looks like another decent year for credit, with developed markets set for full year returns around 5-8% and emerging markets expected to do even better.
  • The persistent rally in EUR spreads has continued to erode the valuation advantage of EUR over USD credit but strong Eurozone fundamentals could drive further EUR spread outperformance.