Easy does it for credit as rate volatility subsides
Senior Strategist (Interest rates, Govies, Linkers)
Credit market monthly review – July 2017
- 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.