HALISTER1: EUR Credit Spreads Wider But Not at Entry Level Yet: Commerzbank

EUR Credit Spreads Wider But Not at Entry Level Yet: Commerzbank

(Bloomberg) -- Buoyant new issue supply and a focus on global monetary policy currently drives sentiment in credit markets, but better entry levels may lie ahead, Commerzbank analysts including Bernhard Grünäugl write in client note.
  • In particular, higher-beta segments from corporate hybrids to HY and banks’ AT1 are widening on the back of rising risk aversion ahead of crucial headline events
    • These themes are likely to remain; would wait for better entry levels before adding risk in these segments
  • With the next reporting season and the associated blackout periods still some weeks away, a substantially more severe dent in risk sentiment might be needed to cool down primary mkt activity; but in the absence of hawkish surprises from major central banks, this remains unlikely for now
    • Recent M&A activity has added the potential for blockbuster deals to an already impressive pipeline
  • Senior credit curves should maintain a steepening bias; shy away from increasing spread duration too aggressively
  • Says investors willing to re-engage the market at already slightly more attractive yield levels should do so via the lower-rated part of the CSPP ‘buying candidates’ spectrum; steady ECB buying should temper volatility and any potential fallout from rising risk aversion
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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